Japan's $96.5 Billion Intervention Loses Steam as Yen Struggles Against Dollar
Japan's record $96.5 billion yen intervention has lost 61% of its initial FX gain, as the currency continues to struggle against the dollar. The Finance Ministry reported ¥15.3993 trillion of operations between July 30 and August 26, with USD/JPY trading near 160.06.
This level is significant because it represents a retracement of about 61% of the initial intervention-driven decline. Initially, the dollar fell from roughly ¥163 to ¥155.20, but has since recovered about ¥4.86 of that ¥7.80 decline.
The intervention was notable for its coordination with the US, as well as South Korea's simultaneous won purchases. However, interest rates remain a key anchor, with Japan's policy rate standing at 1.00% and the federal-funds rate at 3.75%, maintaining a 275-basis-point gap that rewards yen-funded carry trades.
The market has assigned a 65% probability to a Bank of Japan rate increase in September, according to Reuters, which could strengthen the yen sharply and reverse hedged-fund leadership.