What the US-Japan Currency Intervention Means for the Yen, Rates, and the Dollar
About this episode
The episode discusses the recent US-Japan currency intervention and its implications for the yen and dollar.
The US and Japan coordinated on the biggest currency market intervention in 15 years, helping to stabilize a weakening yen. Karen Fishman, senior FX strategist in Goldman Sachs Research, and Praneet Shah, global head of FX options trading in Global Banking & Markets, discuss why the US joined the action, why the yen still appears undervalued, and whether another intervention might follow. Key takeaways: The scale of Japan’s intervention was historic, but the US role was symbolic. Japan's operation, estimated to be worth up to $85 billion over July 30 and July 31, was its largest two-day intervention on record outside of October 2011. The US leg was much smaller, but pushed the yen further by signaling the US’ willingness to help. Washington's involvement was likely aimed at limiting volatility in US markets. The timing of US support coincided with some volatility in US interest rates, in addition to other factors. Intervention may buy time, but it is a short-term measure. In the longer term, policy measures convincing Japanese investors to shift back towards Japanese assets could help reverse the yen's low valuation. This episode was recorded on August 10…
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