Yen Intervention: Will Rate Hike Be Enough to Stem Currency Slide?
Japan's economy has been struggling with a weak currency for over a decade. The situation came to a head in late July, prompting the Ministry of Finance and the U.S. Treasury to intervene in the foreign exchange market.
The intervention was successful in pushing the yen from 163 to the dollar up to 157 on August 3rd. However, trading has since reversed course, with the yen falling back to 159 as of Friday and looking set to weaken further without changes to Japan's monetary or fiscal policies.
Investors now anticipate an 80% probability of a rate hike from the Bank of Japan at its policy meeting on September 17-18. This would have significant implications for the globally important carry trade, which indirectly influences American interest rates.