Value of Japanese yen jumps against dollar, investors suspect intervention

The yen jumped suddenly against the dollar on Monday, with traders citing yen-buying intervention by Japanese authorities to boost the currency that is languishing near 34-year lows. The dollar fell sharply to 156.55 yen from as high as 160.245 earlier in the day. Trade sources said Japanese banks were seen selling dollars for yen.

Traders had been on edge for any signs of action from Tokyo to prop up a currency that has fallen 11% against the dollar so far this year, as even a historic exit from negative rates has failed to lift the currency.

"The speed and magnitude of the move from 160 to 155 with the lack of bounce suggests official intervention. Timing couldn't have been better with low liquidity on a Japanese holiday.

BANK OF JAPAN HIKES INTEREST RATES FOR FIRST TIME IN 17 YEARS

Prior intervention suggests a 5 yen move to 155 but if the MoF wants to send the message to the shorts that enough is enough, then a move towards 150-152 would send a clear message."

"Intervention risks remain salient over the JPY. Given that it is the Golden Week holiday where local liquidity is thin, one can even argue that this presents an opportune time for intervention if the authorities want to come in hard on foreign speculators during the London/New York trading session."

"Today's move, if it represents intervention by the authorities, is unlikely to be a one-and-done move. With FOMC and payrolls on the docket this week, we can likely expect more follow through from MOF if USD-JPY travels to 160 again. In a sense, the 160-level represents the pain threshold, or new line in the sand for the authorities."

"With Japan on a public holiday, most were expecting a quiet day's trade. But it seems some had other plans with speculative moves sending USD/JPY soaring to 160 earlier in the session. And that clearly irked central authorities enough to ditch their day off and intervene in the currency markets, and send USD/JPY 400-pips swiftly lower. If so, this would be their first intervention since the GDC during Asian trade. So much for a day off."

"Highly suspicious that authorities may be in to keep FX markets in check, given the sharp 5 JPY move down from above 160."

"Recent weakness in JPY – be it the magnitude or the level - has likely raised alarm for intervention."

"But market dynamics of wide UST-JGB yield differentials may suggest that intervention may not be as effective. Hence, a combination of BoJ demonstrating urgency to normalise policy and MoF conducting FX intervention may perhaps be more effective than the MoF doing a solo."

"I guess it's too early to tell whether there's intervention or not, because Japan market is closed and as a result, naturally you would think there's a bit of illiquidity which could cause possibly sharp moves."

"It's hard to say whether it's intervention or not...having crossed 155, intervention risks were rising. Whether it is in effect intervention, we will only know later. And also, we should see the efficacy of intervention. How good the efficacy of intervention is... In past interventions, we have seen that the immediate response of the yen, it moves by a few yen but then it trades back in line with fundamentals and I think the biggest driver for dollar/yen is the U.S.-Japanese yield differentials."

"If you're asking me how much further from here it can go. I don't have a number. We are in unchartered territory."

"The extent of move looks like an intervention, although liquidity is thin so its still hard to draw any firm conclusions."

The move will still likely be faded, atlas partially, with Fed expected to be hawkish this week and BOA narrative completely missing any hawkish hints last week."

"I'm still cautious to assume it is the Ministry of Finance stepping in though, given that we haven't heard of the usual 'rate checks' taking place, which typically come before an intervention takes place. It could easily be a case of thin liquidity due to the holiday exacerbating the move lower, with few wanting to buy the dip in USD/JPY given the threat of the MOF stamping down on things at any moment."

"Naturally, though, the further the JPY rallies, and the longer the move goes on, the greater speculation will grow that the MOF are behind it, though only the end-of-month FX data will tell us for sure."

"The move has all the hallmarks of an actual BoJ intervention and what better time to do it than other on a Japanese public holiday which means lower liquidity in USD/JPY and more Bang for the Bank of Japan's buck!"