Japan's yen is surging and dragging down the dollar across markets, as rate checks have investors on high alert over the risks of the first joint U.S.-Japan currency intervention in 15 years. After leaping on Friday, when the New York Federal Reserve contacted traders to check rates, the yen has rallied a further 1.2% to 153.89 in Asia trade on Monday.
The euro is at four-month highs and precious metals such as silver and gold have soared to record peaks above $100 and $5,000 an ounce.
"I can not say whether there will be an intervention in the near future, but right now it seems that market players are unwinding their short positions, betting that the yen will not hit 160 to the dollar. In the long run, the yen and the dollar move sideways because of the corporate demand for the dollar."
"That's the first time the Fed has checked a currency in more than a decade. They've threatened before, but to physically go and do it is a big change in their MO. "We're under a new regime ... we've seen an anti-U.S. dollar move. There is random talk of a Plaza Accord 2.0, which would matter, and signal a weaker USD."
"There is potentially something larger at play here. The threat of intervention reflects a broader investor concern that Japanese and U.S. authorities would like a weaker USD. This combined with Trump's erratic policymaking, including the threat of 100% tariffs on Canadian exports if it signs a trade deal with China, is weighing on the appeal of USD assets."
"It sends a strong signal ... I think the market will take it more seriously as opposed to if it's just the Ministry of Finance or Bank of Japan checking rates. Because it's rare for the U.S. to get involved, and you can see this as somewhat of a coordinated attempt or effort to rein in the yen weakness. "The weak yen has become problematic ... in the sense that it's unpopular with the public, because the weak yen is seen as contributing to the inflation problem. So perhaps ... this intervention threat itself is an attempt to check the yen weakness and prevent it from becoming a political issue."
"It's a continuation of last week's trends. JPY is stronger as intervention risk overhangs, and short positions in yen are squeezed. USD risk premium is continuing to rise as investors balk at U.S. policy direction."
"It's more driven by the fact that the Fed and the Treasury are seemingly involved in the background. You can make the argument that the fact that the Treasury intervened in the Argentinian peso not that long ago shows that they're serious about these types of things and it's not just verbal intervention.
"I know Argentina is not Japan, but nonetheless, the fact that the Treasury actually intervened in another currency pair rather forcefully showed pretty clearly that they're not going to hesitate to act. So when they were rate checking in dollar/yen, everybody's ears perked up and the market realised that they have to be taken seriously."
