(MENAFN) In Asian trading on Monday, the Japanese currency witnessed a notable rise against the dollar, prompting speculation of extensive intervention by Japanese banks to sell the dollar. Traders observed sudden and significant movements in the currency market, with the dollar tumbling to its lowest levels against the yen in 34 years earlier in the day. The dollar experienced a sharp decline to 155.25 yen, marking a substantial drop from its previous level of 160.245 yen, before rebounding slightly.
By 0500 GMT, the yen had strengthened to 155.86 yen, reflecting a notable 1.6 percent increase. However, trading remained subdued due to the Golden Week holiday observed in Japan. Currency analysts pointed to the abrupt and pronounced decline in the dollar-yen exchange rate as indicative of intervention by Japanese authorities to support the yen.
Sim Moh Siong, a currency strategist at the Bank of Singapore, likened the observed market behavior to the "duck test," a common proverb in America and Britain suggesting that if something appears to be a certain way, it likely is. This analogy underscores the perception among traders that the rapid depreciation of the dollar against the yen is likely a result of intervention efforts by Japanese banks.
Market participants had been anticipating intervention by Japanese authorities to stem the yen's decline, which has amounted to approximately 11 percent so far this year. The yen's recent appreciation comes on the heels of disappointment among traders following the Bank of Japan's decision to maintain its monetary policy unchanged. Additionally, the central bank provided scant indications regarding any potential reduction in its purchases of Japanese government bonds, which could have contributed to alleviating the yen's downward pressure.
Overall, the surge in the Japanese yen against the dollar underscores the complexities of currency markets and highlights the role of intervention measures by central banks in influencing exchange rates. As market participants continue to monitor developments, the yen's trajectory remains subject to various factors, including economic policies and geopolitical events impacting investor sentiment.
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