Japanese Yen softens, traders watch further US-Japan joint currency intervention
The USD/JPY pair recovers some lost ground to near 157.65, snapping the three-day losing streak during the early Asian trading hours on Monday.
The USD/JPY exchange rate has climbed back to around 157.65, ending a three-day decline on Monday's early Asian trading hours. Traders are closely watching for any further intervention from both the United States and Japan, following a significant rebound triggered by coordinated operations in Tokyo and New York last week. Japan's Finance Ministry and US Treasury Secretary Scott Bessent are reportedly collaborating closely to support the currency, a move unseen in decades.
Bessent stated that the US is not averse to stepping in again if necessary. Japan confirmed the first joint intervention with the US in currency markets in 15 years, according to Finance Minister Satsuki Katayama's statement. Meanwhile, uncertainty in the Middle East could give the US Dollar (USD) an advantage over the Japanese Yen (JPY).
US President Donald Trump had canceled planned military strikes against Iran due to striking a deal on its nuclear program and reopening the Strait of Hormuz. However, Iranian officials dismissed Trump's claim that Tehran had requested a pause as a "new lie" and said their armed forces were "on high alert and ready for any eventuality."
The Japanese Yen, one of the world's most traded currencies, is influenced primarily by the performance of the Japanese economy, the Bank of Japan's (BoJ) policy, and the spread between Japanese and US bond yields. The BoJ plays a crucial role in determining the Yen's value, often intervening to lower its value, although this rarely happens due to political concerns.
The Bank of Japan's ultra-loose monetary policy between 2013 and 2024 caused the Yen's depreciation against its main currency counterparts, but recent efforts to unwind this policy have given the Yen some support. The gradual abandonment of the ultra-loose policy, coupled with interest rate cuts in other major central banks, is narrowing the differential between the 10-year US and Japanese bonds, which has favored the US Dollar against the Japanese Yen.
The Yen is often viewed as a safe-haven investment, strengthening in times of market stress due to its perceived reliability and stability.
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