USD/JPY reached its daily high at 160.23 and then plummeted to 155.04 within about 4-5 hours.
The Japanese Yen saw unexpected volatility in the Asian trading session on Monday (April 29th). USD/JPY soared to a daily high of 160.23 before sharply dropping to 155.04, signaling a fluctuation of over 500 pips in just a few hours. Several other yen pairs also experienced significant swings.
According to Reuters, traders suspect that Japanese authorities intervened covertly in the market. However, local officials declined to comment.
"No comment for now," said Masato Kanda, Deputy Minister of Finance for Foreign Affairs.
With Japanese exchanges and government offices closed for the national Showa Day holiday, market suspicions are heightened.
"The move has all the hallmarks of an actual BOJ intervention, and what better time to do it than on a Japanese public holiday, which means lower liquidity in USD/JPY and more impact for the BOJ," said Tony Sycamore, a market analyst at IG.
Japanese officials have been signaling possible intervention for months. Recently, Japan even made a joint statement with the US and South Korea to stress the importance of exchange rate stability.
The lack of concrete action until last week led many traders to dismiss the threats as mere rhetoric. However, today's volatility demonstrates Japan's willingness to intervene to stabilize the yen exchange rate when fluctuations are deemed excessive.
"Intervention risks remain high for the JPY. Given the thin local liquidity during the Golden Week holiday, one could argue that this is an opportune time for intervention if authorities want to deter foreign speculators during the London/New York trading session," said Nicholas Chia, Asia macro strategist at Standard Chartered Bank in Singapore. "If today's move indeed represents intervention by the authorities, it's unlikely to be a one-off event. With FOMC and payrolls scheduled for this week, we can expect further action from the MOF if USD-JPY approaches 160 again. In a way, the 160-level serves as the pain threshold or a new line in the sand for the authorities."