On Thursday, Japan and South Korea’s foreign exchange regulators appeared to simultaneously intervene in the currency markets during the New York trading session, after both countries had experienced a long period of weakness in their respective currencies against the US dollar.
Reports from the Nikkei Shimbun stated that Japanese authorities engaged in significant “buying of yen, selling of dollars” intervention in the New York foreign exchange market on Thursday. This move directly caused the US dollar to plummet by 2.6% against the Japanese yen, reaching 159.225, the lowest point in over two months.
This intervention by Japan occurred just before the Bank of Japan (BOJ) is set to announce the results of its monetary policy decision.
It was reported that US authorities also conducted what is seen as a precursor to intervention, known as “rate checks.” This action sends a crucial signal that Tokyo and Washington are working together to prevent the yen from falling to its lowest level in forty years.
Atsushi Mimura, an official from Japan’s Ministry of Finance, stated to the Asahi Shimbun, “We believe that the support provided by the US has gone beyond mere moral support.” He did not clearly state whether intervention had taken place, but emphasized the close cooperation with the US to address currency issues.
At the same time as the yen’s sudden rise, South Korean authorities also took action. Market sources revealed that South Korea’s foreign exchange regulators executed a rare intervention to sell US dollars overnight on Thursday.
As a result of this intervention-driven buying, the South Korean won surged by 2% against the US dollar in a single day, reaching 1,418.0 won to 1 US dollar, marking a nine-month high since October 20th of last year.
The Korean won had hit a 17-year low of 1,561.50 last month. However, with the upward trend this month and the intervention, the won’s cumulative increase this month has exceeded 8%, expected to achieve the largest monthly increase since March 2009.
In response to this news, officials from the South Korean Ministry of Finance are currently refusing to comment officially on the intervention.
Lee Min-hyuk, an analyst at KB Kookmin Bank in Seoul, stated that the correlation between the South Korean won and the Japanese yen has sparked speculation that the foreign exchange regulators of both countries may have intervened in the market.