The intervention of the Japanese central bank in the currency markets prompted a strengthening of the dollar against the yen last week, but the dollar weakened against higher-yielding currencies, such as the euro, as investor risk appetite increased.
The dollar exchange rate against the Japanese currency rose by 1.88 percent last week, to 85.74 yen. However, the American currency weakened against the European one, causing the euro price to jump by 2.61 percent, to 1.3042 dollars. The euro also strengthened against the Japanese currency, by 4.98 percent, reaching an exchange rate of 112.02 yen.
Although the American currency strengthened against the Japanese, the dollar index, which shows the value of the dollar against six major world currencies, fell by 2.43 percent last week, to 80.86 points, the lowest level in five weeks.
Last week, the focus of investors was on the dollar and yen, as after weeks of threats, the Japanese monetary authorities finally intervened in the market. Concerned about the damage the strengthening yen was causing to Japanese exporters, the Bank of Japan intervened on Wednesday by selling yen for the first time in six years when the dollar exchange rate fell to 82.87 yen, the lowest level in 15 years. In just one hour, the dollar price jumped to 84.80 yen, and by the end of the week, it further increased.
“The Japanese authorities have clearly indicated that they do not want the dollar exchange rate to fall below 80 yen. They intervened at around 83 yen per dollar, and I expect they will try to push it above 85 yen. In the medium term, the authorities will continue with policies to stimulate economic growth,” says Simon Wong, an analyst at Standard Chartered Bank.
