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Yen rises after Japan intervenes unilaterally for the first time in 24 years

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The dollar fell sharply against the Japanese yen on Thursday in the first intervention to support the currency since 1998, after the Bank of Japan reversed the trend of other central banks by not raising interest rates.

the dollar
USDJPY,
-0.89%

fell quickly, trading at 142.20 from 144.08 on Wednesday, timed into action around the end of the business day in Japan.

Masato Kanda, the deputy finance minister for international affairs, told Bloomberg that the country was taking bold steps in the markets.

Expectations had arisen that Japan might step in, with a currency falling 23% this year to its lowest point in 24 years.

“The big question is whether it will make a difference and change the course of the Japanese yen’s decline in the long term,” said Michael Hewson, chief market analyst at CMC Markets UK. “The 145/146 level appears to be a level that the Bank of Japan seems happy to defend at the moment, as last week’s interest rate check was around similar levels.”

The Bank of Japan kept interest rates unchanged earlier in the day and Bank of Japan Governor Haruhiko Kuroda said it had no plans to keep up with rate hikes of the US 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 Friday market holiday, when volumes are expected to be low.

Viraj Patel, global macro strategist at Vanda Research, said a history of interventions shows they rarely work, but this time shorting the yen is a busy trade, and the European Central Bank and People’s Bank of China can also help by pushing back against dollar strength.

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US stock futures
ES00,
-0.15%

were higher after the intervention. The dollar’s strength, not only against the yen, but also against other currencies, including the euro, is seen as a tax on risky assets, and it is also a barrier to US multinationals.

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