Endollar Exchange Rate Plummets After US CPI Release... "Japanese Authorities Intervention"

From 161.6 yen to 157.4 yen ↓
Japan "No Comment on Intervention"

The yen-dollar exchange rate plunged more than 4 yen at one point on the 11th (local time) in the New York foreign exchange market. This has led to speculation that the Japanese authorities intervened in the market once again.

On the day, the U.S. Department of Labor announced that the June Consumer Price Index (CPI) rose 3% compared to the same month of the previous year. This was below both the market forecast (3.1%) and the previous month's figure (3.3%).

Immediately after the CPI announcement, the yen-dollar exchange rate fell from the 161.6 yen range to the 160.7 yen range. Shortly after, it dropped to around 157.4 yen. Around 8 a.m. on the 12th Japan time, the yen-dollar exchange rate was moving around 159.3 yen. This marks the highest level of the yen's value since mid-June.

Major foreign media interpret this as the Japanese government and the Bank of Japan (BOJ) intervening in the market by buying yen and selling dollars.

According to Kyodo News, Masato Kanda, Director-General of the Japanese Ministry of Finance, met with reporters on the evening of the 11th after the CPI announcement and said, "We have no position to comment on whether there was intervention," adding, "We will announce at the end of the month." He further stated, "I wonder if the market is becoming dominated by speculation," and "The adverse effects of a weak yen on the public cannot be ignored."

Regarding this, the Mainichi Shimbun and others cited government officials saying that the authorities intervened in the exchange rate market.

In the market, the dominant view is that the Japanese authorities intervened. Takafumi Onodera, trading officer at Mitsubishi UFJ Trust and Banking, said, "There is a significant movement in the yen," and "Considering the timing after the weak CPI (rise in yen-dollar exchange rate), it is likely to be intervention." Yusuke Miyairi, currency strategist at Nomura International, evaluated that the fact that Director-General Kanda explained to reporters late in the evening was meaningful.

The Japanese authorities intervened in the market twice on April 29 and May 2. However, on the 28th of last month, the yen-dollar exchange rate exceeded 161 yen for the first time since 1986. Lea Traub, portfolio manager at Lord Abbett, said that unless the monetary policies of the U.S. and Japan change, the likelihood of the yen continuing to strengthen is low.