Yen Surges Amid Suspected Japanese Intervention

The yen surged against the dollar on Thursday, July 30, prompting investors to suspect intervention by Japanese authorities. The sudden and large-scale move led markets to believe that Japan was buying up its currency to prop it up. The dollar/yen pair fell to as low as 157.8 and was last trading at 158.61, down 2.5 per cent on the day.

Currency analysts are pointing to a possible intervention by the Japanese authorities, who have been warning of action for months due to currency weakness exacerbating the cost-of-living impact of rocketing energy import prices. The yen has traded near 40-year lows against the dollar, pressured by Japan's relatively low interest rates and higher energy prices.

Daisaku Ueno, chief FX strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo, said 'it is hard to imagine anything other than currency intervention causing a drop of as much as 5 yen in such a short period of time.' Tom Nakamura, head of fixed income and currencies at AGF Investments in Toronto, also thinks it's an intervention, citing the suddenness and degree of the move.