According to data released by the Bank of Japan on Friday, Japan may have intervened in the foreign exchange market as recently as Thursday for as much as 3.57 trillion yen ($22.43 billion), to lift the yen from 38-year lows.
The data indicated that the Ministry of Finance appears to have intervened in the market on Thursday to support the Japanese currency, spending between 3.37 and 3.57 trillion yen.
When US consumer price data was released on Thursday, the yen traded roughly 161.61 to the dollar. It then quickly gained momentum, rising almost 3% to reach 157.40.
The dollar declined due to weaker US inflation data, and some traders hypothesised that Japanese officials may have taken advantage of this weakness to strengthen the yen further.
The Ministry of Finance has only reiterated that authorities are prepared to take necessary action in the foreign exchange market and has not commented on whether or not it was the cause of the yen’s abrupt and sharp strengthening.
Oxford Economics senior Japan economist Norihiro Yamaguchi says that considering the large discrepancy between money market dealers’ estimates and the BOJ’s projected current account balance, it was “highly likely” that Japanese authorities would step in on Thursday.
According to the central bank’s estimate for the state of the money market on July 16, there will be a net receipt of funds of 3.17 trillion yen, while estimates from money market brokerages that do not include intervention point to a net credit of 200–400 billion yen.
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