The U.S. Dollar Weakens as Intervention Risk Drives Yen Higher
BlockBeats News, January 27th: The US dollar fell across the board on Monday, and the yen jumped to its highest level in over two months amid speculation of US-Japan joint intervention in the forex market following statements from the Japanese Prime Minister and the Ministry of Finance. Investors also cut their dollar positions ahead of the Federal Reserve meeting and amid expectations of President Trump announcing his pick for the new Fed chair. Concerns about another US government shutdown also weighed on the dollar. The dollar-yen pair dropped nearly 3% in the past two trading days, marking the most severe decline since the market turbulence related to last April's "Liberation Day" tariff.
A source said the New York Fed had inquired with traders about the dollar/yen exchange rate, seen as a precursor to intervention. Dominic Bunning, Nomura's G10 FX strategist, said: "Clearly, if both the Japanese Ministry of Finance and the US Treasury want to cap the upside in dollar-yen, that would be a more powerful driver." A Goldman Sachs analyst said: "Given potential US involvement, we view the signal for intervention as stronger than in 2022 or 2024, making any actual intervention likely to be coordinated." "However, when the broader backdrop suggests the pressure faced by the currency is warranted, the impact of direct operations tends to be temporary." (FXStreet)
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