The Japanese yen experienced significant volatility on July 11-12, 2024, following the release of lower-than-expected US inflation data. This sparked widespread speculation about potential intervention by Japanese authorities to support the currency. The yen strengthened sharply against major currencies, particularly the US dollar, before giving up some gains. On Thursday, the dollar fell to 157.40 yen after reaching a 38-year high, marking its largest daily decline since May.Japan’s top currency diplomat, Masato Kanda, declined to comment on whether authorities had intervened but stated they would ‘take action as needed’. The Bank of Japan reportedly conducted a ‘rate check,’ often seen as a precursor to actual intervention. These actions have kept markets on edge, with investors closely watching for signs of official intervention.The yen’s volatility had a significant impact on Asian stock markets. Japan’s Nikkei 225 index fell sharply by 2.45% to 41,190.68 points, retreating from recent all-time highs. In contrast, other Asian markets showed mixed performance, with Hong Kong’s Hang Seng index rising 2.4% to 18,260.The currency movements come amid changing expectations for US Federal Reserve policy. The softer US inflation data has increased market expectations for a rate cut in September, with the CME FedWatch tool showing over 90% probability, up from around 50% a month ago.Analysts remain divided on the effectiveness and duration of any potential intervention. Charu Chanana, a strategist at Saxo Capital Markets, suggested that ‘Japanese interventions are part of a new strategy and are accompanied by fundamental factors, such as US inflation in this case, which makes the strength of the yen a bit more durable’.As markets await further clarity, attention has turned to upcoming money market data and central bank decisions. The volatility in currency markets and its impact on stock exchanges have become a focal point for investors and analysts globally.
Key points
- The Japanese yen experienced significant volatility following lower-than-expected US inflation data, sparking intervention speculation.
- Japan’s Nikkei 225 fell sharply by 2.
- Market expectations for a US Federal Reserve rate cut in September have increased dramatically.
- Analysts are divided on the effectiveness and duration of potential currency interventions.
45%, while other Asian markets showed mixed performance.
Contradictions👾While some sources suggest direct intervention by Japanese authorities, others note the lack of official confirmation, creating uncertainty about the exact nature of the currency movements.
