The Japanese yen strengthened significantly against the US dollar over the past few days, reaching a more than one-month high. Speculation arose that the Japanese government had intervened in the currency markets, causing the USDJPY pair to drop to 155.75 yen on Thursday morning, following a sharp decline since the previous Friday. Traders believe the government’s intervention was in response to warnings about excessive volatility in the currency markets, with Bank of Japan data suggesting that Tokyo may have spent 2.14 trillion yen ($13.5 billion) on interventions last week.
Despite some relief for the yen due to expectations of a potential interest rate cut by the US Federal Reserve in September, its significant gains were likely influenced by government intervention, although Japanese officials did not confirm any actions. The yen had been under pressure in recent weeks amid speculations of a September rate cut by the Fed, fueled by weak inflation data and dovish signals. The Japanese government last intervened in the currency markets in late-April and early-May, when the USDJPY pair surpassed the 160 level. The yen’s vulnerabilities stemmed from ongoing signs of sluggish economic growth in Japan, limiting the Bank of Japan’s ability to implement tighter monetary policies.