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The US and Japan stage a “Yentervention”

Japan and the United States confirmed today they jointly intervened to prop up the Japanese yen, the first such action since 2011. Washington purchased an estimated $5 to 10 billion worth of yen, though the White House has not confirmed the exact amount. The Japanese currency recently plunged to a 40-year low against the US dollar due to rising oil prices, persistent budget deficits and a wide interest-rate gap with the US. Washington reportedly feared that Japan, as the largest foreign holder of US government debt, could unsettle the American bond market should it have to dump more US Treasuries – and push up borrowing costs for Washington. Commenting on the decision, however, President Donald Trump focused less on markets and more on the US-Japan relationship, telling reporters that “we're always there for Japan.” Traders are now watching whether the Bank of Japan raises interest rates from its current level of 1%, which would give the yen more durable support.