Japan and US confirm rare joint intervention to prop up yen

BBC:

Japan and the United States have confirmed a rare, coordinated yen-buying intervention to halt the Japanese currency’s slide to 40-year lows, with Tokyo signalling it is willing to take further action if needed.

The Japanese Ministry of Finance confirmed the joint intervention after a statement by US President Donald Trump on Sunday announced that Washington was helping to prop up the yen as a sign of friendship and to support the global economy.

“They have a weakening yen, and they wanted a little bit of help. And we’re always there for Japan,” Trump said in response to a reporter’s query about why the US is helping to support the currency.

The yen leapt after the announcement, leaving traders on high alert for further intervention from authorities. The Japanese currency gained as much as 1.4 percent to hit a nearly three-month high of 155.20 per US dollar, compounding a 3.8 percent surge over the previous two sessions. The yen also advanced broadly against other major currencies, including the euro and sterling.

The latest bout of aggressive yen-buying heavily pressured the US dollar. In early Asian trading on Monday, the euro climbed to a 1.5-month high of $1.1559, while sterling hovered near a two-week top at $1.3476.

However, the rapid appreciation of the currency immediately weighed on the equity market. The Nikkei share average tumbled, reversing course from the one-week high it had achieved in the previous session.

Analysts say the intervention underscores both countries’ resolve to prevent global spillovers from a sell-off in the yen and Japanese government bonds, including by adding pressure on already rising US Treasury yields.