An employee counts Japanese yen banknotes while selling "lucky bags" at a store in Tokyo in January 2016. [Getty Images]
An employee counts Japanese yen banknotes while selling "lucky bags" at a store in Tokyo in January 2016. [Getty Images]

The Japanese and US governments moved simultaneously to intervene in foreign exchange markets to halt the yen's weakness, the Nikkei reported Friday.

The Nikkei said the sharp strengthening of the yen on the New York foreign exchange market Thursday — which briefly pushed the yen-dollar rate to around 157.80 yen per dollar during intraday trading — was driven by the Japanese government and the Bank of Japan buying yen and selling dollars. The paper also cited market sources as saying US monetary authorities conducted a "rate check," a preliminary step before direct market intervention.

A rate check refers to the practice of authorities contacting major banks to inquire about foreign exchange trading conditions before intervening in the market. US authorities also conducted a rate check on the yen earlier this year, led by Treasury Secretary Scott Bessent.

The yen began to strengthen sharply after 10:30 p.m. Thursday Japan time, gaining more than 2% against the dollar in roughly 50 minutes from around 162.80 yen per dollar. The yen-dollar rate subsequently fell back to around 159.54 yen per dollar as of 6 a.m. Friday Japan time.

The New York Federal Reserve, acting on instructions from the US Treasury, was understood to have requested rate checks from multiple banks, the Nikkei reported, describing the simultaneous involvement of both US and Japanese authorities as highly unusual.

The paper also analyzed that the fiscal authorities of both countries appeared to have timed their intervention to maximize its effect, taking advantage of a period when the dollar was weakening after the Federal Reserve held its benchmark interest rate steady.

The Bank of Japan was expected to hold its policy rate at "around 1.0 percent" at its monetary policy meeting Friday morning, and the Nikkei noted that the central bank's stance on future rate hikes following the announcement could be the next key variable for the yen.


yckim6452@heraldcorp.com