The Japanese yen has had a turbulent week with strong price fluctuations. Observers suspect that the government intervened. And soon intervenes again and supports the yen.
The Japanese yen is experiencing ups and downs in its price, as CNBC reports. Last Monday, the Japanese currency fell to an exchange rate of 160 (exactly 160.03) against the dollar for the first time since 1990. However, the currency quickly recovered and rose to 156 yen per dollar. The price recovery took place against the background of speculation about intervention by the Japanese authorities.
Two days later, on Wednesday, the yen rose again. After an increase of two percent, the Japanese currency was quoted at 153 yen against the dollar. According to market analysts, this could also possibly be due to an intervention. According to the report, the experts don’t know any more details.
Analysts at Bank of America Global Research estimate that the alleged first intervention could have amounted to between 5 and 6 trillion yen (the equivalent of 32.7 to 39.2 billion dollars, around 30.41 to 36.4 billion euros). These estimates are based on data from the Bank of Japan.
The Japanese authorities have not yet made any official confirmation of possible support for the yen. Nicholas Smith, Japan strategist at CLSA, noted to CNBC: “The government refuses to disclose whether it intervened or not, but I think many people have little doubt.”
The yen’s weakness continued despite the Bank of Japan’s monetary policy decision on Friday – and despite warnings from Japanese authorities. Since the Bank of Japan’s historic meeting in March, when it ended the world’s last period of negative interest rates, the yen had lost 7.3 percent to Monday’s low.
In the future, observers expect further interventions by the Japanese authorities to support the currency. Edward Yardeni, president and chief investment strategist at Yardeni Research, told CNBC: “The Bank of Japan will likely be forced to intervene further.”
If the Bank of Japan (BoJ) allows the yen to fall further, this could lead to an unintentionally sharp rise in inflation. That would hardly be in the interests of the relevant powers.
However, Japan’s shareholders benefit from the weak yen. The “Neue Zürcher Zeitung” (NZZ) recently pointed out that the “weaker yen had lifted share prices to record levels”. The reason: A low yen “inflates the foreign profits of Japanese export companies through currency conversion.”