Yen Strengthens on Prospects of US-Japan FX Intervention... Nikkei Index Plunges

Yonhap News Agency

The Japanese yen continues to strengthen as speculation grows that the US and Japanese authorities may jointly intervene in the foreign exchange market to prevent further depreciation of the yen. As concerns mount over deteriorating earnings for export-dependent companies, the Nikkei index is also showing weakness.

As of 10:52 a.m. on January 26 in the Tokyo foreign exchange market, the yen-dollar exchange rate was trading in the mid-154 yen range per US dollar. This is the first time the yen-dollar rate has reached the 154-yen level since December 17 of the previous year.

The Nikkei reported, "There is growing speculation that Japanese and US authorities are cooperating to curb excessive yen weakness, which is fueling a wave of yen buying."

The Nikkei also noted that last weekend, US financial authorities conducted a "rate check," a preliminary step before direct intervention in the exchange rate. It was reported that the Federal Reserve Board had already begun monitoring the exchange rate under the direction of the US Treasury Department.

Additionally, the Nikkei mentioned that the market interpreted Japanese Prime Minister Sanae Takaichi's remarks during a Fuji TV debate the previous day-saying, "We will take all necessary measures against speculative and abnormal movements in the foreign exchange market"-as a factor restraining yen weakness, which also contributed to the yen-buying trend.

Meanwhile, the Nikkei 225, Japan's leading stock index, plunged at the opening of trading on January 26 as concerns spread that a stronger yen would hurt the earnings of export companies. At one point in the morning, the Nikkei index fell by about 1.9%, breaking below the 53,000 mark.

Currently, the decline has eased somewhat. As of 1:44 p.m., the yen-dollar exchange rate was trading in the upper 153-yen range, and the Nikkei index stood at 52,782.