Japanese yen hits 3-month high

The yen rose for the third consecutive session against the US dollar, days after the US and Japan jointly intervened in the foreign exchange market.

On the morning of 3/8, the Japanese yen strengthened by 1% against the US dollar, at one point trading at 155,2 JPY per 1 USD. This marked the yen's strongest level in the past three months.

The yen also appreciated against other currencies, including the euro and the British pound. This development sparked speculation that Japanese officials might have continued to intervene in the market.

Reuters reported that an investor also noted that in this morning's session, many short yen positions were closed.

"Given the magnitude and timing of the USD/JPY exchange rate movements, the possibility of intervention cannot be ruled out", said Hirofumi Suzuki, a currency strategist at SMBC. He explained that a significant number of short yen positions existed previously. Therefore, buying to close these positions tends to amplify the price increase.

Late last week, the yen surged more than 3% against the USD in just two sessions. On 31/7, Japan's Ministry of Finance confirmed that it had jointly purchased yen in the market with the US. Data from the Bank of Japan (BOJ) indicated that approximately 58,9 billion JPY was bought on 30/7.

"History shows that coordinated intervention in the foreign exchange market is highly effective. Investors should align with official actions rather than betting against them", commented Elias Haddad, global market strategist at BBH. He noted that since 1998, all three instances of coordinated US intervention in the foreign exchange market were successful.

The last time the US directly supported the yen was in 2011, by coordinating with other G7 nations to stabilize the market after Japan's double disaster of earthquake and tsunami.

The yen has been under pressure for many years due to the BOJ's slow approach to tightening monetary policy. This has led to a significant disparity in interest rates between Japan and other countries. US interest rates are currently around 3,5-3,75%, while Japan's is 1%.

"Without a change in policy or global growth outlook, we believe encouraging capital repatriation will have the biggest impact on the yen's price in the long term", analysts at Goldman Sachs stated.