Jakarta, ThedailyID — The United States and Japan reportedly intervened in the foreign exchange market to support the Japanese yen. If confirmed, it would mark their first coordinated currency operation since 1998.
The Financial Times reported that the move came after the yen weakened to 163.24 per U.S. dollar last month. That was its lowest level since 1986.
Analysts said higher U.S. interest rates, rising oil prices, and capital outflows from Japan pushed the yen lower.
According to sources familiar with the transactions, the Federal Reserve Bank of New York sold euros and bought yen on behalf of the U.S. Treasury Department. Goldman Sachs and Morgan Stanley reportedly handled the trades.
The report followed a sharp rebound in the yen last week. The currency traded around 160.53 per dollar on Friday after briefly strengthening to nearly 158 per dollar a day earlier.
“It remains unclear whether Tokyo intervened, but the price action closely resembles previous interventions,” Stephen Innes of SPI Asset Management said.
Analysts quoted by the Financial Times estimated Japan spent about 8.45 trillion yen, or roughly US$52.8 billion, on the intervention.
Japan’s Nikkei newspaper estimated the amount at 6 trillion to 7 trillion yen.
If the reports prove accurate, the operation would become the first coordinated U.S.-Japan intervention since the Asian financial crisis in 1998.
Analysts said Japan’s wide interest rate gap with the United States continues to pressure the yen. Higher oil prices and concerns over Japan’s fiscal outlook have also weakened the currency.
Markets also expect the Federal Reserve to raise interest rates once more before the end of the year. That outlook encourages investors to borrow cheaply in yen and buy higher-yielding dollar assets.
Investors call this strategy the carry trade. It has increased capital outflows from Japan and added more pressure on the yen.
Neither the Japanese government nor U.S. officials have confirmed the reported intervention.
