Source: Fortune
Summary
The US and Japan have collaborated to intervene in the currency market, causing the yen to rebound from its weakest levels since 1986. The US Treasury Secretary, Scott Bessent, indicated that the yen is undervalued and excessive volatility is unhealthy. The intervention, which included direct purchases of the yen and verbal support, has raised the stakes for traders betting against the yen. The coordination between the two countries appears to be the tightest in decades.
Our Reading
The numbers tell one story.
The US and Japan’s joint intervention has put pressure on traders betting against the yen. The degree of coordination between the two countries is unusually high. Bessent’s commitment to shoring up the yen is clear, as evidenced by a photograph of his notepad with a “To Do” list that includes buying $5-10 billion worth of Japanese yen. The intervention has triggered a sharp gain in the yen, but its impact may be short-lived without backing from rate differentials.
The situation can be reframed as: “A desperate bid to arrest a currency’s free fall.”
