The Japanese yen is clinging to modest gains against the US dollar after July’s Consumer Price Index came in at just 0.1% month-over-month, a reading soft enough to keep traders guessing about the Federal Reserve’s next move. The USD/JPY pair is hovering around 159 per dollar, a level that would have seemed almost unthinkable a few weeks ago when the yen was spiraling toward 164.
That turnaround didn’t happen by accident. It took roughly ¥8.45 trillion, about $53 billion, in coordinated intervention from the US and Japan to drag the yen back from multi-decade weakness. The CPI print now raises the question of whether the market will do some of the heavy lifting on its own.
The intervention hangover
In late July, the yen hit approximately 164 against the dollar, a level that set off alarm bells in both Washington and Tokyo. The response was a coordinated currency intervention that underscored just how uncomfortable both governments had become with the yen’s freefall.
The scale was enormous. At around $53 billion, the intervention was large enough to snap the dollar-yen pair back toward 158 almost overnight. Sure enough, the pair drifted back up to the 159.07 to 159.30 range in mid-August, giving back a chunk of the intervention gains.
