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TOKYO — Washington and Tokyo jointly intervened to shore up the Japanese yen for the first time in nearly 30 years after the currency sank to its weakest level in decades, the Financial Times (FT) has reported.
The reported intervention came after the yen slid to 163.24 per dollar last month, its weakest level since 1986, as higher US interest rates, rising oil prices, and persistent capital outflows weighed on the currency.
The newspaper reported, citing people familiar with the matter, that the Federal Reserve Bank of New York took the unusual step of selling euros to buy yen on behalf of the US Treasury on Friday.
The transactions were carried out through Goldman Sachs and Morgan Stanley, according to FT.
Washington’s move came as the yen rebounded sharply last week, fueling speculation that Japanese authorities had also intervened in currency markets.
“Whether Tokyo was actually involved remains unclear, but the price action had all the familiar fingerprints,” Stephen Innes at SPI Asset Management wrote in a comment.
Analysts cited by FT estimated Japan’s intervention may have totalled about 8.45 trillion yen ($52.8 billion).
The Nikkei business daily put the amount at between 6 trillion and 7 trillion yen.
According to FT, the move would be the first coordinated US-Japan effort to support the yen since 1998.
While surging oil prices and concerns over debt are major reasons for the yen’s weakness, a key driver is the wide gap between interest rates in Japan and those in the United States and other major economies.
And with markets increasingly betting that the US Federal Reserve could hike rates again before the end of the year, the divergence is more pronounced.
This gap has encouraged investors to borrow cheaply in yen and invest in other assets outside Japan with better returns — known as a “carry trade” — resulting in capital outflows and downside for the yen.
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Credit belongs to : www.manilatimes.net
