Yen soars, investors spooked by intervention fears

July 18, 2024

Key points

Yen rises to a six-week high, fuelling speculation of official intervention.
U.S. interest rate cuts expected, impacting the dollar and other currencies.

Japan’s yen surged to a six-week high on Thursday, sparking rumours of official intervention. Meanwhile, the dollar experienced broad losses as markets anticipated U.S. rate cuts in the near future.

Euro peaks, sterling steady, yen jumps in early Asian trading

The euro (EURUSD) reached a four-month peak overnight and stayed near $1.094, while sterling (GBPUSD) remained steady at $1.3007, just below the one-year high achieved overnight. The yen (USDJPY) jumped sharply on Wednesday and rose another 0.5% to 155.37 per dollar during the quiet early hours of the Asian session on Thursday.

The USDJPY-ECN chart illustrates the yen's significant movement as investors react to fears of market intervention. Displaying a daily interval, the chart shows a 0.25% trend, opening at 156.159 and closing at 156.551, with a high of 156.574 and a low of 155.365. Key indicators include moving averages (5, 10, 20, 30), trading volumes, and the MACD (26, 16, 9). The moving averages highlight the recent upward momentum, while the MACD indicates changes in market sentiment.

See: Yen on the rise as seen on the VT Markets app.

Bank of Japan money market data indicated that authorities might have purchased nearly 6 trillion yen last week. Traders speculated that this week’s movements showed signs of further intervention or markets being spooked by that possibility.

Many traders and Japanese investors, after the intervention, seemed to be looking to reload on their trades. The big move on Wednesday would have caught them off guard and triggered a reassessment or unwinding of those positions.

Markets predict rate changes, Trump comments unsettle investors

Interest rate markets are pricing in more than 60 basis points of U.S. interest rate cuts this year and approximately 20 basis points of hikes in Japan. This narrows the wide rates gap that had previously encouraged investors to take large short positions in the yen.

Trump described the dollar’s strength and the weakness of the yen and yuan as a major problem, which unsettled markets.

You might be interested: Asian currencies face challenges as markets react to Trump attack fallout

So far this year, the yen is the worst-performing G10 currency against the dollar, losing over 9%, while the yuan is down about 2.2%.

Japan’s yen, the worst-performing Group-of-10 currency this year against both the dollar and the euro, may lose value and become more volatile https://t.co/5s3YVP1LcI
— Bloomberg (@business) August 30, 2021

China’s yuan rose slightly on Wednesday and will be closely monitored on Thursday as traders await news from a key leadership gathering in Beijing expected to conclude later in the day. In early offshore trade, the yuan (USDCNH) hovered around its 50-day moving average at 7.2667 per dollar.

New Zealand’s dollar (NZDUSD) jumped through its 200-day moving average on Wednesday and held its gains early on Thursday at $0.6076. This followed some sticky domestic elements of inflation, which paused bets on imminent interest rate cuts.

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