Japan’s Ministry of Finance Intervenes, Sends Yen Plummeting

By: Barbara Zigah

For the first time in more than six years, the Ministry of Finance in Japan has intervened in their currency’s appreciation by buying the U.S. Dollar repeatedly in Asian trading, forcing the Japanese Yen to plummet versus all major currencies. According to dealers, beginning at around 9:30 a.m. (JST), the repeated buying of the greenback sent the U.S. currency to a new high of 85.14 Yen, markedly higher than the 82.87 Yen 15-year low which had been struck just prior to the start of the intervention. Some local dealers estimate that the sales of the Japanese currency in the first few moments of trading were as much as $3.6 billion, and even when the U.S. currency rose above 85 Yen, the intervention continued.

Despite the intervention, dealers remain skeptical that the greenback can hold above 85.00 Yen, a target that they believe the Japanese authorities are aiming for. As many traders correctly point out, the economic problems in the United States are quite numerous, and there is the possibility that softer than expected economic data may provoke the Federal Reserve Bank to take additional easing measures. Next week, the Federal Open Market Committee will meet to discuss economic policy, and should they signal that further easing is necessary then the attempt by Japanese authorities to bolster the U.S. Dollar/Japanese Yen rate will have been frustrated.