The Japanese yen strengthened against the dollar this week, sparking speculation of government currency intervention similar to July’s operation. Currency strategist Marc Chandler of Bannockburn Capital Markets warns that this rally may be short-lived, as markets have already priced in an anticipated Bank of Japan rate hike. The July intervention, estimated at 85 billion dollars and conducted alongside the U.S. Treasury, was the biggest currency market operation in 15 years. Following that move, the yen initially gained 3.5% before weakening by nearly 2% in the subsequent month. Japan’s position as the largest foreign holder of U.S. public debt adds complexity, as selling Treasuries to support the yen could potentially push up long-term U.S. interest rates.
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