Dollar Sinks Against Yen in Joint Market Intervention

The US dollar has weakened sharply against the Japanese yen after market interventions by both countries. The dollar's value dropped from above 163 yen to below 160 yen, and then further down to nearly 155.20 yen after the official announcement of the intervention.

Japanese Finance Minister Satsuki Katayama confirmed that Japan had purchased yen in coordination with the US Treasury Department. US President Donald Trump stated that the US got 'financial benefit' out of the intervention, calling it a 'signal of friendship'. He added that it's also good for the world economy.

According to Neil Newman, managing director and head of strategy at Astris Advisory Japan, such overt acknowledgment of market intervention is rare. The last big example was when governments intervened following a massive earthquake and tsunami disaster in northeastern Japan in 2011.

The yen's prolonged weakness against the dollar has been a source of frustration for Tokyo, as it makes imports more expensive and pushes prices higher. The Bank of Japan and the Federal Reserve kept their interest rates unchanged at meetings last week, maintaining the gap between interest rates that led investors to sell yen and buy dollars.

The latest intervention appears to be having a more durable impact than earlier cases this year, and the yen may have a slightly stronger path for the rest of the year. However, the factors that contributed to the yen's long-term weakness remain, including Japan's massive government debt and high oil prices due to the war.