Japan intervenes to prop up yen after it hits 24-year low against surging dollar
JAPAN has intervened in currency markets to prop up the plunging yen for the first time since the late 1990s as global policymakers grow increasingly worried about the surging dollar.
Authorities stepped in to arrest the slump yesterday after the Bank of Japan (BOJ) promised to stick with ultra-low interest rates even as the rest of the world tightens policy to tackle inflation.
The yen has lost a quarter of its value against the dollar this year to hit a 24-year low.
But it bounced back by as much as 2.6pc after the government attempted to stem the losses by dipping into its foreign currency reserves and selling dollars in exchange for yen.
The dollar has surged to multi-decade highs against the yen, pound and euro in recent weeks.
With the BOJ ruling out an imminent rise in interest rates, the intervention was Japan’s last tool to boost its currency. Masato Kanda, Japan’s top currency official, said: “The government is concerned about excessive moves in the foreign exchange markets, and we took decisive action just now. We’re seeing speculative moves behind the current sudden and one-sided moves in the foreign exchange market.”
Analysts were sceptical that the intervention can stem the slide as the BOJ sticks to the negative rates experiment.
Jonas Goltermann, markets economist at Capital Economics, said: “Ultimately, the success of intervention will depend in large part on how the relative monetary policy stance evolves. The yen’s 25pc fall against the dollar since last December is in large part due to the shift in interest rate differentials.”
Sterling has slumped to a 37-year low against the dollar, adding to inflationary pressures by increasing import costs.
The pound is also down at a two-year low against a broader basket of currencies but is trading above the lows seen since the Brexit vote.