NEW YORK: The US dollar slipped across the board on Monday and the Japanese yen jumped to a more than two-month high on Monday as speculation mounted of coordinated currency intervention by authorities in the US after remarks from Tokyo’s prime minister and Japan’s leading currency diplomat.
Investors also scaled back their dollar positions ahead of a Federal Reserve meeting and a possible announcement by the Trump administration of a new Fed chair. Worries about another US government shutdown also pressured the dollar.
The dollar was 1.3 percent lower against the yen at 153.73, on pace for a nearly 3 percent slide over the last two trading sessions, the worst such weakening since the August 2024 when the Japanese currency appreciated sharply due to an unwind of the popular yen carry trade. Tokyo continued to preoccupy investors after Japan’s Prime Minister Sanae Takaichi said on Sunday her government would take the “necessary steps” against speculative market moves.
A source on Friday told Reuters that the New York Federal Reserve had checked dollar/yen rates with dealers, which is considered to be a precursor to intervention. The rush to exit short yen positions has lifted the currency by over 3 percent off Friday’s low.
“Clearly if you’ve got both the MOF (Japanese Ministry of Finance) and the US Treasury looking to limit the upside in dollar-yen, that’s going to be a more powerful driver,” said Dominic Bunning, head of G10 FX strategy at Nomura.
Japanese Finance Minister Satsuki Katayama declined to comment on the rate checks, while currency diplomat Atsushi Mimura said the government would maintain close coordination with the United States on foreign exchange and act appropriately.
The US has not joined a coordinated effort to intervene in the Japanese currency since March 2011, when it sold yen following the Fukushima earthquake.
The yen is under pressure in part because of concerns over Japan’s government debt that stands at more than double its economic output. A historic rise in market interest rates has raised fears for Japan’s ability to service its debt, but Takaichi has said she will cut taxes as she campaigns for a snap election on Feb 8. Bank of Japan money market data on Monday indicated that a spike in the yen rate against the dollar on Friday was unlikely to be the product of official Japanese intervention.
Dollar selling on Monday helped push the euro and the British pound to four-month highs, while the Australian dollar hit its strongest since September 2024.
The euro was last up 0.4 percent at USD1.1857, sterling was 0.3 percent higher at USD1.36945, while the Aussie advanced 0.4 percent to USD0.6922. “This is a reinvigorated ‘Sell America trade,’ and it has to do with prediction markets showing that government shutdown is back on the table,” Jonathan Petersen, macro strategist at investment research firm Variant Perception.
The top Democrat in the US Senate, Chuck Schumer, said his party would vote against funding legislation that includes money for the Homeland Security Department that oversees ICE, the federal immigration agency. Congress faces a January 30 deadline to fund the government or risk a partial government shutdown.