MAJOR central banks agreed to co-ordinate action to drive the yen lower last night in a desperate bid to stem the yen’s rapid rise.
The extraordinary move comes after the yen surged to a record 76.25 against the dollar – fuelling fears that Japan’s economy, already crippled by last week’s earthquake and tsunami, would suffer further as its goods became less competitive.
“Given yen moves after the tragic events that hit Japan, the United States, Britain, Canada and the European Central Bank have agreed with Japan to jointly intervene in the currency market,” finance minister Yoshihiko Noda said following an emergency meeting of the Group of Seven (G7) nations.
Japanese authorities will buy US dollar/yen in the market today. Other central banks will act when their markets open, Noda said. But he declined to comment on the size of Tokyo’s intervention.
The US dollar spiked immediately after the annoucement, rising about two yen to above 81 yen immediately after the announcement which came as markets opened. And Japanese stocks were also boosted – with the Nikkei jumping three per cent in the first hour of trading. “This is not just one central bank, this is seven. It’s a brave man to be on the other side of that trade,” said Rochford Capital managing director Thomas Averill.
Tokyo last intervened in the currency market on 15 September last year, when it sold 2.13 trillion yen, a record amount for a single day.