Yen rebounds from 18-month low

The yen rose 0.43% against the U.S. currency to 158.46 per dollar

The yen bounced back from an 18-month low against the dollar on Wednesday as Japanese officials warned of potential intervention to ​shore up the currency.

The yen rose 0.43% against the U.S. currency to 158.46 per dollar. It earlier hit 159.45, the ‍weakest since July 2024.

The yen ‌has tumbled on concerns about looser fiscal and monetary policy as speculation rises that Prime Minister Sanae Takaichi will call an early snap election, a move that could delay parliamentary approval of a bill that grants the government the right to issue deficit-covering bonds.

Takaichi’s plan to leverage her astonishingly high personal ratings in calling a snap election is translating into a rise in bets on reflation in the Japanese economy, more government spending and higher yields, said Karl Schamotta, chief market strategist at Corpay in Toronto. All of that is translating into downward pressure ‌on the yen, which of course is being offset by intervention threats from authorities.

Japanese Finance Minister Satsuki Katayama issued ​another verbal warning on Wednesday, saying officials would take appropriate action against excessive FX moves without excluding any options.

So far, however, officials have not indicated that an intervention is likely in the very near term.

It would come as a little bit of a surprise to markets since recent commentary hasn’t conveyed much urgency, said James Lord, global head of FX & ‍EM strategy at Morgan Stanley.

Some also see weakness in the yen as having moved too far.

Analysts at LMAX Group note that from a technical perspective, there are signs of a meaningful top in place after the market put in a multi-year high in 2024.

From a fundamental perspective, speculative yen longs have been largely unwound, leaving room for new short positioning if USDJPY breaks higher through 160, though rising ⁠intervention warnings from Japanese officials add two-way risk, they said in a report.