Japan and US Join Forces to Support Yen in Rare Coordinated Move
The Japanese yen has jumped again after Japan and the US confirmed they intervened in currency markets to buy yen, a rare show of coordinated support.
According to Bank of Japan data, the buying on Thursday may have totaled as much as $58.97 billion, with analysts at Brown Brothers Harriman noting that when the US joins in, it 'packs a punch' and raises the odds officials will do it again if the move reverses.
The yen's longer-running weakness is tied to interest-rate gaps: Japan's rates have stayed much lower than those in other major economies, which rewards investors for holding higher-yielding currencies instead of yen. Goldman Sachs said that longer-lasting support would likely need a shift in the policy mix or steps that encourage Japanese investors to bring money home.
The intervention is seen as an 'official put' - a perceived willingness to defend against a fast yen drop - which can force hedge funds and corporates to run less one-way positioning and pay up for short-dated currency protection.