Dollar Slips as US Treasury Considers Intervention in Yen Market
The US dollar declined against the Japanese yen on Friday, July 31st, amidst rumors of potential intervention from the U.S. Treasury.
According to a source familiar with the matter, the U.S. Treasury informed banks that it may intervene in the yen market and they should 'stand ready for future action'. This news sparked a modest rise in the yen, with some traders speculating about actual intervention rather than just the possibility of it.
Eric Theoret, an FX strategist at Scotiabank, said that even the mere possibility of intervention can have a significant impact on markets, especially during times of low liquidity. Strategists at Goldman Sachs also stated that they see intervention as an effective tool for authorities to buy time before fundamental factors improve.
The Bank of Japan kept short-term interest rates steady at 1% in a widely expected move. BOJ Governor Kazuo Ueda signaled further rate hikes from as soon as September, citing risks skewed to the upside and underlying inflation exceeding their target.