Currency

The yen surged against the dollar due to reported Japanese intervention to strengthen the yen, causing the dollar to fall sharply. Bank of Japan Governor Kazuo Ueda emphasized that the monetary policy does not specifically target currency rates but acknowledged the economic impact of exchange-rate volatility.

The Japanese government is suspected of intervening in the foreign exchange market on April 29, spending an estimated 5 trillion yen to prevent the yen from falling further against the US dollar. While the government has not officially confirmed the intervention, several factors suggest its involvement.

The Japanese yen weakened to its lowest level since April 1990 on Monday, driven by a combination of thin trading due to a holiday in Japan and traders testing key levels. The yen's decline was exacerbated by the triggering of stop-loss orders, forcing individuals holding long yen positions to close their positions.

The Japanese yen weakened against the US dollar on Tuesday, giving back some of its gains after suspected intervention by Japanese authorities, while strong US economic data boosted the dollar. The dollar index gained ground after data showed US labor costs increased more than expected, likely delaying a much-anticipated interest rate cut later this year.

Japanese authorities are considering intervening in the currency market to address the recent sharp decline of the yen, according to a ruling party executive. Satsuki Katayama, acting chairperson of the Liberal Democratic Party's policy research council, believes the current volatility in the dollar/yen exchange rate is excessive and out of line with economic fundamentals.