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U.S.-Japan jointly intervenes to support yen after 40-year lows
Japan sold nearly $60 billion to bolster the yen, and the move could affect U.S. Treasury yields depending on how Japan funds future interventions.
Japan’s yen strengthened further after the U.S. and Japanese governments confirmed their first joint currency intervention since 2011, aimed at propping up the currency that has been near 40-year lows. Reuters reports that investors are scrutinizing both when the intervention took place and how much it will ultimately affect the yen.
The reports note questions around the timing after Japan delayed another interest rate rise last week, citing an earthquake in the country. Reuters also points to the prospect of a Federal Reserve rate move as soon as next month, which could further influence expectations for yen direction.
Reuters says Japan sold almost $60 billion to support the yen, and that U.S. plans include spending between $5 billion and $10 billion as part of the effort. The two governments pledged to repeat the action as necessary, while fallout is being watched for potential aggravation to U.S. bond yields if Japan were to liquidate Treasuries to raise dollars.
Reuters adds that a Fed repo facility using Japan’s bond holdings as collateral was activated, which could reduce the need for outright Treasury liquidation. The broader market backdrop also includes oil prices falling more than 5% after Iran bombing paused, and Asia markets starting the week lower as South Korea’s KOSPI fell more than 5% after a record rally.
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