Why Japanese Yen Strengthens Sharply Against US Dollar (USD), Shocks Crypto & Stocks

Japanese yen (JPY) made a sharp recovery against the US dollar after falling to 160 on Monday, a low last seen in October 1986. JPY fell to a low of 160 but saw a sudden recovery to 156 against US dollar. The US dollar started weakening after the Bank of Japan (BOJ) kept interest rates unchanged recently, contrary to what markets and economists expected.

The dramatic recovery in JPY was regarded as a possible government intervention as Japanese banks have been reportedly selling US dollars aggressively. During the recent monetary policy decision, BOJ stated that the central bank will buy bonds as before to keep the economy growing at a healthy pace, while revising its inflation forecasts higher. Traders have been on alert for a potential intervention from Japanese authorities for some time now as the yen sank to 34-year lows and lost more than 10% against the dollar so far this year.

Japan’s top currency diplomat Masato Kanda said “I won’t comment now,” when asked about the market view that Japan has intervened in the currency market, reported Reuters.

Global capital markets expert The Kobeissi Letter posted on X that a 2.5% swing in one of the biggest currencies in the world in a matter of minutes is a major event that can change the global market overview. “Clearly, something is happening here and it comes just days after the Bank of Japan left rates unchanged,” it added.

The decrease in US dollar brought a welcomed recovery in the stock markets. US dollar index (DXY) dropped to 105.46 and US Treasury yields also saw a dip. US stock market futures Dow Jones, S&P 500, and Nasdaq all saw a recovery. Asian stock markets also rose on Monday as investors shrugged off the hot PCE inflation report, while looking ahead to the US Federal Reserve’s monetary policy decision coming May 1.

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Crypto Market Reactions

The DXY fall was welcomed by the crypto market as it could potentially increase positive sentiment for market recovery. The US Treasury Dept Q2 2024 refunding announcement this week could bring up to $1.4 trillion liquidity injection, which is good for risk assets.

The crypto market remains under pressure as traders deal with news of crypto liquidations ahead of the Fed monetary policy decision. The liquidation of longs continues in the crypto market on Monday, wiping out signs of market recovery today.

Bitcoin and Ethereum continue to saw massive amounts of longs liquidations, with mixed bullish and bearish signals from the derivatives market, as per Coinglass.

BTC price currently trades at $62,241, whereas ETH price is changing hands at $3,180, both falling in the last 24 hours.

Also Read: Bitcoin and Altcoins Come Under Pressure Ahead of Fed’s Interest Rate Decision on May 1