US Treasury signals readiness to intervene in yen market

Japan and the United States mounted a coordinated defense of the yen on Thursday, with Tokyo spending an estimated $53 billion buying the currency while the New York Federal Reserve conducted rate checks with banks — signaling Washington's direct involvement in a rare joint intervention that sent the yen surging 3.3% against the dollar during the New York trading session.reuters+1

The effort marks a deepening of US-Japan cooperation on currency markets unseen in decades, according to Bloomberg, with the two nations pushing back against moves in the $9.5 trillion-a-day global foreign exchange market. Reuters reported on Friday that the US Treasury informed banks through the Federal Reserve Bank of New York that it may intervene directly in the yen market and that they should "stand ready for future action".bloomberg+1

Intervention Fades as BOJ Holds Steady

The yen's gains proved short-lived. After strengthening to as low as 157.98 against the dollar on Thursday, the currency slipped back toward 160 on Friday after the Bank of Japan kept its policy rate unchanged at 1% in an 8-1 vote. The decision was widely expected, as the BOJ had only raised rates from 0.75% to 1% in June.reuters+2

Governor Kazuo Ueda struck a hawkish tone in his press conference, leaving the door open to future rate hikes and noting greater upside risks to prices, but stopped short of signaling imminent action. Board member Hajime Takata was the sole dissenter, arguing for a hike to 1.25%.cnbc+2

US Backs Japan Beyond 'Moral Encouragement'

US Treasury Secretary Wally Adeyemo said in an interview that he believes the yen is "significantly undervalued" and that "excessive volatility" is unhealthy. Japan's top currency official Atsushi Mimura said Friday that Japan was receiving support from the US "beyond moral encouragement".bitget

Japanese Finance Minister Satsuki Katayama reiterated that authorities remain ready to intervene at any time and confirmed close coordination with Washington. The intervention came after the yen fell to 40-year lows in recent months under pressure from rising oil prices, persistent budget deficits, and wide interest rate differentials between the US and Japan.tmgm+1

Markets Await Next Move

TD Securities noted that while Ueda "sounded the most hawkish that he's been in a long while," overnight index swap markets are pricing in roughly an 88% probability of a rate hike by October. JPMorgan strategist Ikue Saito cautioned that "a sustained and notable rise in the yen would require an even more hawkish stance" from the BOJ.tmgm+1