Instant View: Yen soars, markets suspect Japan intervention

LONDON, July 30 (Reuters) - The yen surged against the dollar on ‌Thursday, in a move so rapid ​and large in ​its scale that it alerted investors to the prospect of intervention by Japan to prop up its weak currency.

Markets have been on alert for yen-buying by Japanese authorities, who have warned of action for months as currency weakness exacerbates the cost-of-living impact of rocketing energy import prices.

The yen has traded near 40-year ‌lows against the dollar, pressured by Japan's relatively low interest rates and as higher energy prices hit the nation's terms of trade.

Dollar/yen fell ⁠to as low 157.8 and was last trading at 158.61, down 2.5% on the day. The yen also jumped against the euro, sterling and Australian dollar.

COMMENTS:

DAISAKU UENO, CHIEF FX STRATEGIST, MITSUBISHI UFJ MORGAN STANLEY SECURITIES, TOKYO:

"It is hard ‌to imagine anything other than currency intervention causing a ‌drop of as much as 5 yen in such a short period of time. They may have put unannounced intervention into practice. If it was indeed an intervention, many market participants had expected it to take place after the FOMC and Bank of Japan meetings, so there may have been an intention to catch the market off guard."

"However, whether ​this will shift the trend toward a stronger yen remains doubtful. Speculation about a U.S. rate hike in September persists, alongside safe-haven dollar buying. While speculative yen depreciation might be temporarily curbed, real demand and investment-driven dollar buying—related to importers and the new NISA—will likely continue."

TOM NAKAMURA, HEAD OF FIXED INCOME AND CURRENCIES, AGF INVESTMENTS, TORONTO:

"Yes, I think it ⁠is intervention, although we haven't seen anything definitive. The suddenness and degree of the move in dollar/yen suggests intervention. The chatter is that Japanese and international bank have been aggressive sellers. This comes at a time when the dollar seemed to ​be on weaker footing and with U.S. Treasury market stabilizing after yesterday's sell off."

JONAS GOLTERMANN, CHIEF MARKETS ECONOMIST, CAPITAL ECONOMICS, LONDON:

"The size of the move strongly suggests that this is intervention, though no firm evidence at this point. The Japanese authorities may see yesterday’s muddled message ​from Warsh and consequent downward pressure on the dollar as an opportunity to shift momentum in dollar/yen. ‌Some similarity to what they did in the summer of 2024, when intervention followed a soft US CPI print. The potential for sparking a similar (if probably smaller) carry trade unwind is there, with short yen positioning looking pretty stretched."

NEIL JONES, MANAGING DIRECTOR OF FX SALES AND TRADING, TJM, ⁠LONDON:

"The 400 point sell off in the U.S. dollar-yen strongly suggest further official MOF intervention to me. The yen is outperforming across the board. This is more than just a weaker dollar."

YUJI SAITO, EXECUTIVE ADVISOR, SBI FX TRADE, TOKYO:

"This is clearly different from the kind of move you see when rate checks are conducted. Looking at the chart, the upside was capped two or three times before the dollar started falling. ⁠Given the circumstances, it is reasonable to think that intervention was likely conducted."

"The key question is whether authorities will keep pushing until the dollar breaks below the 155-yen line. We want to gauge that as ​just how serious the government is about defending the currency."

ROBERTO COBO GARCIA, HEAD OF G10 FX STRATEGY, BBVA, MADRID:

"There has been a sharp move lower in dollar/yen that strongly suggests official intervention. The pair has broken below the 161 level, and it appears Japanese authorities have taken advantage of the bearish momentum generated by the weaker U.S. data to sell dollars and support the yen."

JUAN PEREZ, DIRECTOR OF TRADING, ‌MONEX USA, WASHINGTON

"The yen is a steady-Eddy type of asset. So when in one day, the intraday change, is over 1%, almost 2% as it is in front of me right now, that means that there's some sort of intervention."

FRANCESCO PESOLE, CURRENCY ANALYST, ING, LONDON:

"My personal ‌feeling is it looks like an intervention but that's nothing more than my personal feeling. The size of the drop is generally a decent indicator, secondly there was no other massive driver, and the third indication ⁠is it wouldn't be out of the ordinary for the BOJ to ‌intervene in such an environment because they have shown ​a preference to intervene after a dollar negative event — as we had with the Federal Reserve."

"So, I wouldn't be surprised at all if it were intervention, perhaps trying to reduce the risk around the BOJ tomorrow in case there is some disappointment."

(Reporting by Reuters Markets Team; Compiled by Dhara Ranasinghe; ‌Editing by Samuel Indyk)

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