The Japanese authorities launched an all-out battle against currency speculators between June 27 and July 29, spending 5.5 trillion yen (about $36.6 billion) to prop up their wobbling national currency. Bloomberg cited figures released by the country's Ministry of Finance.
This latest currency intervention followed a spring marathon when the government spent more than $62 billion to save the yen from sneaky speculators.
However, expectations that the interest rate gap between the central banks of Japan and the United States would narrow triggered fluctuations in the exchange rate. As a result, we saw the yen, which was trading at 161 yen per dollar a month ago, drop below 152.5 yen.
These currency movements could be mainly explained by different approaches to monetary policy. The Bank of Japan stubbornly kept interest rates in negative territory, while the Federal Reserve hiked them up. In March, the Japanese central bank finally realized that it needed to change course and raised rates to 0-0.1% per year. Unfortunately, this did not help the yen, and the government had to resort to interventions once more. Recently, the Bank of Japan made another heroic effort and raised the rate again, this time to 0.25%.
