The dollar significantly weakened against the Japanese yen on Monday, August 3, falling to nearly 155.20 yen in early trading after an official announcement of intervention. This follows a substantial drop from 156.75 yen late Monday afternoon Tokyo time. The yen's surge was more than 3% over two trading sessions in the week ending August 2, with Japan's finance ministry confirming joint yen-buying intervention with the US. Bank of Japan data also suggested Japan may have purchased as much as $58.97 billion worth of yen on Thursday, July 30, and another $58.97 billion on Friday, July 31, with the confirmed joint intervention with the U.S. Treasury Department.
The intervention caused the yen to leap, rising as much as 1% against the US dollar in the Asian morning to peak at 155.20 per US dollar, its strongest level in about three months, before settling at 0.7% higher at 156.46. The US dollar index also slid more than 1.5% in the week ending August 2, showing little change at 99.78 on Monday. Other currencies also benefited, with the euro rising to a 1.5-month high of $1.1559 and sterling hovering near a two-week top at $1.347. The yen also strengthened by about 3.6% from its pre-intervention level against the Singapore dollar on July 30, rising more than 0.7% to 122.06 per Singapore dollar.
Japanese Finance Minister Satsuki Katayama confirmed the finance ministry had purchased yen in coordination with the U.S. Treasury Department, and U.S. Treasury Secretary Scott Bessent also confirmed the effort, stating Washington would not hesitate to participate in further joint intervention. The Japanese Finance Ministry emphasized their resolve to prevent a sell-off in the yen and Japanese government bonds from causing global spillovers, such as upward pressure on U.S. Treasury yields, which have gained almost 57 points since the start of the year. The US willingness to assist was partly driven by concerns that Japan might otherwise sell large quantities of Treasuries, given it is the largest foreign holder of U.S. government debt, which could destabilize U.S. funding markets.
Analysts, however, are skeptical about the long-term effectiveness of the intervention. Stephen Innes of SPI Asset Management noted that yield differentials remain wide, Japan's energy-import burden is significant, and the Bank of Japan is moving slowly. Masahiko Loo, senior macro strategist at State Street, highlighted Japan's plan to use the FIMA repo facility for future interventions, signaling access to dollar liquidity without selling Treasuries. Despite the intervention, some analysts believe the fundamentals driving yen weakness, such as rising fuel costs from the Iran war and interest rate differentials between Japan and the U.S., have not changed, suggesting that sustained yen appreciation may be challenging.
