The dollar declined in Asian trade on Monday amid speculation that US officials may collaborate with their Japanese counterparts to support the yen, following a recent sell-off. This development comes as equities started the week with losses.
Reports indicate that the Federal Reserve Bank of New York had inquired about the yen’s exchange rate with traders, leading to a surge in the Japanese currency. The yen rose over one percent to 153.89 per dollar, marking its strongest level since November. The yen’s recent slide was attributed to concerns over Japan’s fiscal position, the central bank’s decision not to increase interest rates further, and expectations that the US Federal Reserve will maintain its current borrowing costs.
The last time Japanese authorities intervened to support the yen was in 2024, when it reached 160 to the US dollar. The prospect of joint intervention led to a retreat of the dollar across the board, with the euro, pound, and South Korean won also rising. The Singapore dollar reached an 11-year high, while gold prices surged almost two percent, exceeding $5,000 for the first time.
Top currency chief Atsushi Mimura stated that Tokyo will continue to respond to foreign exchange moves, working closely with US authorities as needed. This follows Japanese Prime Minister Sanae Takaichi’s warning that the government will take all necessary measures to address speculative and abnormal movements in the currency market.
The dollar’s decline has been attributed to rate-check chatter and intervention-tinged language from Tokyo, which reminded the market that yen weakness is no longer a free carry. The yen’s jump was enough to knock the broader dollar back into the Asia open.
As the Federal Reserve’s policy meeting approaches, markets are expecting officials to maintain current rates. The meeting is likely to be dominated by questions about politics rather than policy, with market pricing creating risks of a dovish surprise.
Equity markets struggled, with Tokyo sinking 1.8 percent due to the stronger yen, which weighs on Japanese exporters. Other markets, including Hong Kong, Shanghai, and Singapore, also retreated. Oil prices extended Friday’s gains, with West Texas Intermediate rising 0.4 percent to $61.34 per barrel.
Key figures at around 0700 GMT included the dollar/yen at 154.17 yen, down from 157.00 yen on Friday, and the euro/dollar at $1.1859, up from $1.1823. The Tokyo Nikkei 225 closed down 1.8 percent at 52,885.25, while the Hang Seng Index in Hong Kong was down 0.2 percent at 26,706.02.
