U.S. dollar drops, yen hits more than two-month high

The dollar was 1% lower against the yen at 154.15, on pace for a nearly 3% decline over the last two trading sessions

The U.S. dollar dropped across the board and the yen climbed to a more than two-month high on Monday as speculation mounted about currency intervention after remarks from Tokyo’s prime minister.

Tokyo continued to preoccupy investors after Prime Minister Sanae Takaichi said on Sunday her government would take the “necessary steps” against speculative market moves.

Clearly if you’ve got both the MOF (Japanese Ministry of Finance) and the U.S. Treasury looking to limit the upside in dollar-yen, that’s going to be a more powerful driver, said Dominic Bunning, head of G10 FX strategy at Nomura.

We think the signal for intervention is even stronger than in 2022 or 2024 given U.S. participation, making it likely that any actual intervention would be coordinated, analysts at Goldman Sachs said in a note.

However, the impact of direct operations is often only temporary when the broader backdrop justifies the pressures on the currency, as it does today, they said.

The yen is under pressure in part because of concerns over Japan’s government debt that stands at more than double its economic output. A historic rise in market interest rates has raised fears for Japan’s ability to service its debt, but Takaichi has said she will cut taxes as she campaigns for a snap election on February 8.

Bank of Japan money market data on Monday indicated that a spike in the yen rate against the dollar on Friday was unlikely to be the product of official Japanese intervention.

The dollar was 1% lower against the yen at 154.15, on pace for a nearly 3% decline over the last two trading sessions, the worst such weakening since April 2025 following the “Liberation Day” tariff-related market upheaval.