Key facts
- Japan and the United States conducted a coordinated yen-buying intervention on July 31.
- This was the first joint intervention by the US and Japan since 2011.
- The U.S. Treasury sold euros to buy yen.
- The intervention aimed to strengthen the yen without signaling a weaker dollar.
- The Japanese yen strengthened to the lower 155 range against the dollar.
- Bitcoin fell more than 2% following the intervention.
- The yen had previously reached a 40-year low.
- Officials signaled readiness for further action.
The Japanese yen strengthened significantly, reaching the lower 155 range against the dollar on Monday, following a confirmed coordinated yen-buying intervention by Japan and the United States on July 31. This marked the first such joint action between the two nations since 2011. Officials have signaled their readiness for further intervention if necessary.
The intervention involved the U.S. Treasury selling euros to purchase yen, a strategy described as highly unusual by traders and analysts. This approach aims to bolster the yen without explicitly signaling a weaker dollar, which could potentially complicate U.S. efforts to control inflation. The move also comes amid concerns over the yen carry trade, where investors borrow yen at low interest rates to invest in higher-yielding assets elsewhere. A significant unwind of these trades could impact global financial markets.
The yen's slide had reached a 40-year low prior to this intervention. The coordinated action is intended to curb this depreciation and address the broader implications of the yen carry trade on U.S. markets. The intervention's impact extended beyond currency markets, with Bitcoin experiencing a decline of more than 2% following the news, reviving fears of a carry trade unwind that has previously affected cryptocurrency markets. Separately, oil prices fell amid hopes for a Middle East peace deal, while U.S. stocks rallied to record highs.