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The Japanese yen strengthened against the U.S. dollar on Monday, with traders speculating that it's likely due to intervention by the country's authorities to support the currency after it hit its lowest level in over three decades last week.
The yen strengthened to trade around 155 against the dollar (USD:JPY) on Monday, from as high as 160 earlier in the day. To note, Monday is a public holiday in Japan. Sources told Reuters that Japanese banks were seen selling dollars for yen.
"There are strong indications – but still no officiality – that Japanese authorities intervened in the FX market this morning," said Francesco Pesole, FX strategist, ING. "... these moves have all the standard characteristics of currency intervention: the 'line in the sand' at 160, the sharp increase in volume and the size of the move."
Pesole added that markets will closely monitor any comments from Japanese officials, for confirmation of an intervention and to know if this will be an "intervention campaign as opposed to a one-off move."
The yen has weakened over 10% against the dollar this year, despite the Bank of Japan finally ending its negative interest rate regime last month, as traders see rates remaining low for some time. Last Friday, the BOJ maintained rates and raised its inflation outlook marginally for fiscal 2024.
Tokyo last intervened in the currency market by selling the dollar to buy yen thrice in 2022, when the yen slumped to a 32-year low at the time, spending about JPY 9.2T ($59.22B) to defend the currency.