USD/JPY: Japan Officials Break Public Holiday to Intervene in Forex Markets, Yen Gains 2.5%

No official confirmation by Japan, but traders suspect the sharp drop was due to an intervention in the forex markets.

• The USDJPY pair swung aggressively to kickstart the trading week even as Japan was having a day off. Japanese financial authorities had to break their public holiday, the Wall Street Journal reported, when the yen plunged beyond ¥160 to the dollar — a multidecade slump unseen since 1990. It was a long-awaited intervention, but did it work? And are dollar bulls going to back off?
• When the US dollar spiked to a 34-year high of ¥160.20, the Japanese yen took control and overturned the trend, gaining more than 3.5% to a dollar-yen Monday low of ¥154.50. As the session rolled on, however, the yen gains slowly pared back and the exchange rate clocked out at a 2.5% increase of ¥156.30. Early on Tuesday, the dollar is floating at levels just under ¥157.00 while traders are figuring out what happened.
• There hasn’t been an official confirmation from Japan. But the finance ministry’s Masato Kanda said that it was difficult to “ignore the bad effects that these violent and abnormal movements will cause to the nation’s economy.” And once again, as the dollar is gradually regaining its highs against the yen, Japan’s officials are monitoring the forex space, ready to respond to wild currency speculation.