The dollar dropped sharply against the Japanese yen on Thursday, in the first intervention to support its currency since 1998, after the Bank of Japan bucked the trend of other central banks by not hiking interest rates.
dropped swiftly, trading at 142.20 yen from 144.08 yen on Wednesday, in action timed around the close of the business day in Japan.
Masato Kanda, the vice finance minister for international affairs, was quoted by Bloomberg as saying the country took bold action in markets.
Expectations had been building that Japan might intervene, with its currency down 23% this year to 24-year lows.
“The big question is whether it will make a difference and change the long-term direction of the Japanese yen’s decline,” said Michael Hewson, chief markets analyst at CMC Markets UK. “The 145/146 level does appear to be a level the Bank of Japan seems keen to defend at the moment given that last week’s rate check happened around similar levels.”
The Bank of Japan earlier in the day kept interest rates unchanged, and Bank of Japan Gov. Haruhiko Kuroda said it had no plans to keep up with the interest rate hikes from the U.S. Federal Reserve and other central banks. He said the yen’s fall was “one-sided” and driven by speculation.
Japan’s intervention also comes ahead of a market holiday on Friday in which volumes would be expected to be thin.
Viraj Patel, global macro strategist at Vanda Research, said a history of intervention shows they rarely work, but this time shorting-the-yen is a crowded trade, and the European Central Bank and People’s Bank of China also may help by pushing back against dollar strength.
U.S. stock futures
were higher after the intervention. The dollar’s strength, not just against the yen but other currencies including the euro, has been seen as weighing down on risky assets, and it’s also been a drag for U.S. multinationals.