Dollar Regains ¥160 as Yen's Sharp Rally Fades
The dollar made a significant comeback against the yen on Friday, regaining the ¥160 mark after experiencing a steep decline from over ¥163 to around ¥157 just a day earlier. This represents a massive 600-pip gain for the yen in one trading session.
No clear market catalyst was identified as the cause of this sudden and sharp move. However, traders had been watching Japanese officials threaten action if the yen continued to rise above ¥163 per dollar, a level not seen in over 40 years.
It is likely that the Bank of Japan intervened in foreign exchange trading on Thursday, buying up yen and selling dollars during New York trading hours. This would be in line with previous interventions by the Japanese authorities, who have directed currency intervention through the Bank of Japan.
The Bank of Japan kept its policy rate at 1% despite dissenting opinions from some board members, including Hajime Takata, who voted to increase the rate to 1.25%. The BOJ warned that core inflation could accelerate above its 2% target by the second half of fiscal 2026.
The dollar-yen pair subsequently rebounded towards ¥160.70, highlighting how quickly intervention gains can evaporate when fundamentals remain unfriendly.