The Yen's Roller Coaster: Amid Rate Hikes and Intervention Speculation

The yen weakened significantly against major currencies following the Bank of Japan's rate hike to 0.75%. Despite expectations of continued rate increases, unclear guidance led to further yen depreciation. Speculation on official intervention grew as the yen crossed key thresholds against the dollar.

The yen experienced a sharp drop against major currencies on Friday as traders speculated about possible official intervention after the Bank of Japan raised its policy rate to 0.75% without clear guidance on future hikes. This move depreciated the yen further despite expectations of continued rates increases.

In the trading aftermath, the dollar surged 1.2% to a recent high of 157.48 yen, while the euro and Swiss franc both reached new records against the Japanese currency. The pound also hit its highest value since 2008 at 210.58 yen. Market strategist Marc Chandler remarked that the yen's fall reflects disappointment with the BOJ's approach.

With the yen crossing critical levels, traders are anticipating possible intervention similar to actions last taken in July 2024. Finance Minister Satsuki Katayama cautioned that Tokyo would address any excessive market volatility as needed. Meanwhile, EU leaders decided to borrow funds rather than use Russian assets for Ukrainian defense funding, maintaining the euro's stability at $1.1716.

(With inputs from agencies.)