The yen surged by nearly ¥1 against the dollar in the New York market, fueling speculation that the Bank of Japan had conducted a “rate check,” in which it asks financial institutions for current exchange-rate levels. Concerns about yen-buying, dollar-selling intervention by the government and the BOJ intensified.
In the Japanese and US markets on the 18th, the yen weakened from the upper ¥156 range to the mid-¥157 range against the dollar, then fell briefly to the ¥158 range in the morning session in New York before being bought back to the ¥156 range within a short period. Speculation that the BOJ had conducted a rate check began to emerge, heightening concern over levels that could trigger intervention.
The BOJ decided at its monetary policy meeting on the 18th to raise its policy rate to around 1.25%. While a rate hike is generally viewed as a factor supporting the yen, the yen exchange rate moved sharply depending on the time of day.
At the FRB’s FOMC meeting, all voting members supported a rate hike, and market attention centered on the prospect of a widening interest-rate differential between Japan and the US.
Some securities market participants viewed the rate check as an attempt to curb episodes of sharp yen depreciation against the backdrop of reduced trading during the extended holiday period. They said the level for the next intervention could be in the ¥160 range.