Japanese yen surged this week. Why the rally may not last
The yen strengthened against the dollar following the July currency intervention, but weakened in the next month.
TL;DR
- The Japanese yen surged against the dollar this week.
- Speculation of government currency intervention is high.
- A potential interest rate hike by the Bank of Japan (BOJ) could lead to further yen weakness, according to strategist Marc Chandler.
- Chandler suggests a "buy-the-rumor, sell-the-fact" scenario could occur post-BOJ rate hike.
- The yen has generally declined over the past few years even as the BOJ raised interest rates.
- Previous currency intervention in July saw a temporary strengthening of the yen, followed by a decline.
- Comments from BOJ board member Hajime Takata suggesting nimble and data-dependent rate hikes also contributed to the yen's appreciation.
- Potential U.S. Treasury concerns about rising long-term interest rates due to Japan selling U.S. bonds to buy yen may have influenced past intervention.