The yen strengthened as much as 1.4% on Monday, pushing the dollar down to 154.05-154.06 yen, its weakest since February. The move extended a sharp reversal from above 160 the previous week and broke the 155 level that had acted as a floor after earlier interventions. Expectations of faster Bank of Japan tightening formed the backdrop.
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Dollar falls as far as 154.05 yen
The yen gained as much as 1.4% in London trading on Monday, September 7. The dollar fell to 154.05-154.06 yen, its weakest level since February, taking the Japanese currency beyond the peak reached after coordinated intervention by Japan and the United States. Reuters reported that the dollar had traded above 160 the previous Tuesday, while The Japan Times put last week's weakest point for the yen at 160.39. The reversal therefore exceeded 6 yen per dollar in less than a week.[1], [2]
The 155 floor breaks during the session
The move accelerated later in the session when the dollar fell below 155 yen. Masahiko Loo of State Street Investment Management described the break as significant because 155 had acted as a floor after earlier intervention episodes. Traders cited by The Japan Times said thinner liquidity during a US holiday may have amplified the move, but no single trigger was identified for Monday's jump. Reuters also reported that the break extended the sharp reversal that began after the dollar moved above 160 the previous week.[1], [2]
Rate expectations reshape yen positions
Expectations for the Bank of Japan's next move formed the backdrop to the rally. The Japan Times reported that bets on rate increases were growing. Reuters reported that investors reassessed bearish yen positions amid the prospect of faster tightening, possible repatriation by Japanese investors and an unwinding of yen-funded carry trades.[1], [2]
