The dollar slipped in Asian trading on Monday amid speculation that US officials could join their Japanese counterparts in supporting the yen after its recent sell-off, while regional equity markets opened the week on a weaker note.
Reports that the Federal Reserve Bank of New York had contacted traders to discuss the yen’s exchange rate triggered a sharp rally in the Japanese currency, Bloomberg reported. The yen surged more than one per cent to 153.89 per dollar — its strongest level since November.
The yen has been under pressure in recent weeks due to concerns over Japan’s fiscal position, the Bank of Japan’s decision to pause further interest-rate hikes, and expectations that the US Federal Reserve will keep rates unchanged at its policy meeting this week.
Japanese authorities last intervened to prop up the currency in 2024, when the yen fell to around 160 per dollar.
Speculation about possible official intervention pushed the dollar lower across the board. The euro, pound, and South Korean won all strengthened, while the Singapore dollar climbed to its highest level in 11 years.
The weaker greenback sent gold prices surging nearly two per cent, with the precious metal breaking through the $5,000 mark for the first time.
Talk of coordinated action intensified after Japan’s top currency diplomat, Atsushi Mimura, said Tokyo would “continue responding appropriately against FX moves, working closely with US authorities as needed,” in line with a joint statement issued by Japanese and US finance ministers last September.
His comments followed a warning on Sunday from Japanese Prime Minister Sanae Takaichi, who said authorities would take “all necessary measures” to counter “speculative and highly abnormal movements” in currency markets.
Stephen Innes of SPI Asset Management said the dollar was pressured early in the Asia session by speculation surrounding Fed involvement and increasingly intervention-tinged language from Tokyo.
“In thin Asian liquidity, the yen jumped sharply, and that was enough to knock the broader dollar lower,” he said.
Lloyd Chan of MUFG added that the situation could lead to heightened volatility in dollar-yen trading.
“The balance of risks points to dollar vulnerability, with markets navigating intervention uncertainty alongside evolving expectations for Bank of Japan policy and Prime Minister Takaichi’s fiscal stance,” he said.
The weaker dollar helped push gold to a record high of $5,110.12 an ounce, while silver, which crossed $100 on Friday, spiked above $109 on Monday.
Precious metals have been rallying amid strong safe-haven demand driven by rising geopolitical tensions, including former US President Donald Trump’s intervention in Venezuela and a recent warning to Iran. Strong central bank buying, elevated inflation, and renewed concerns over a potential US government shutdown have also supported prices.
“Gold’s price action over recent days has been textbook safe-haven behaviour,” said Fawad Razaqzada, a market analyst at Forex.com. “Underlying demand for protection remains strong, while confidence in the dollar and bonds appears shaky.”
Investors are now turning their attention to the Federal Reserve’s policy meeting this week, where officials are widely expected to hold interest rates steady after three consecutive cuts.
“We don’t expect to learn much at the January FOMC meeting,” Bank of America economists wrote. “The Fed is on hold but remains data-dependent, and the balance of risks around inflation and employment has not shifted significantly since December.”
They added that Fed Chair Jerome Powell’s press conference could be dominated by political questions rather than policy, noting that market pricing still leaves room for a dovish surprise.
Trump has repeatedly criticised Powell, claiming inflation no longer exists and questioning the Fed chair’s competence and integrity.
Equity markets across Asia struggled, following a soft close on Wall Street last Friday.
Tokyo’s Nikkei 225 dropped 1.8 per cent, weighed down by the stronger yen, which hurts Japanese exporters. Hong Kong, Shanghai, Singapore, Seoul, Manila, and Bangkok also declined, while Taipei and Wellington posted gains.
Oil prices extended gains from Friday, when they rose nearly three per cent after Trump said a US “armada” was heading toward the Gulf and warned that Washington was closely monitoring Iran.
Trump has repeatedly left open the possibility of new military action against Tehran following Washington’s backing of Israel’s 12-day conflict in June aimed at degrading Iran’s nuclear and ballistic missile capabilities.
Key figures at around 0700 GMT
Dollar/yen: 154.17 (down from 157.00 on Friday)
Euro/dollar: $1.1859 (up from $1.1823)
Pound/dollar: $1.3664 (up from $1.3636)
Euro/pound: 86.78 pence (up from 86.70)
Tokyo – Nikkei 225: down 1.8% at 52,885.25
Hong Kong – Hang Seng: down 0.2% at 26,706.02
Shanghai – Composite: down 0.1% at 4,132.61
WTI crude: up 0.4% at $61.34 per barrel
Brent crude: up 0.5% at $66.18 per barrel
New York – Dow Jones: down 0.6% at 49,098.71
London – FTSE 100: down 0.1% at 10,143.44
AFP
