The yen strengthened against the dollar on Monday as Japanese officials warned that they would take the necessary steps to address excessive fluctuations in the national currency.
At the same time, the Bank of Japan has yet to make an official statement regarding intervention as the country celebrates Hirohito's birthday.
On Monday morning, the dollar rose to 160.245 against the yen, its highest level since 1990. At the time of writing, the USD/JPY was down 2.01% at 155.09.
Japan's top currency diplomat, Masato Kanda, did not comment on the yen's recovery, Reuters reported.
However, IG's Tony Sycamore said, "This move has all the hallmarks of an actual intervention by the Bank of Japan, and what better time to do it than a holiday in Japan, which means less liquidity in the USD/JPY pair and more benefit for the Bank of Japan."
It is worth noting that the yen's fall to 1990 lows occurred despite the fact that the Bank of Japan ended its negative interest rate policy on March 19, 2024. However, the markets still believe that the BoJ will keep rates low for some time.
The significant difference in interest rates between the Federal Reserve (Fed) and the Bank of Japan has been the main reason why the yen has come under pressure.
Earlier in the day, during a trilateral meeting between the financial leaders of the United States, Japan, and South Korea, they agreed to work closely together to develop the currency market and work towards achieving sustainable economic growth, financial stability, and other goals such as building sustainable supply chains.
The EUR/JPY and GBP/JPY pairs fell 1.45% and 1.46% to 166.53 and 194.38, respectively.
Similarly, the AUD/JPY and NZD/JPY pairs fell 1.27% and 1.58% to 101.80 and 92.58, respectively.
"Today's move, if it represents an intervention by the authorities, is unlikely to be a one-off," emphasized Nicholas Chia of Standard Chartered Bank.
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