The Federal Reserve recently announced that there has been a “lack of further progress” in achieving its 2% inflation target, indicating that interest rate cuts may be delayed until later in the year. In January, investors were expecting around six quarter-of-a-percentage-point cuts in 2024, but have since decreased their expectations.
Following the announcement, the yen experienced a sharp rebound, leading to speculation that government intervention may have occurred to support the currency for the first time since 2022. This speculation was fueled by the fact that the yen had previously reached a 34-year low of 160 to the dollar, after the Bank of Japan decided to keep its benchmark interest rate unchanged at between zero and 0.1%. This decision came after a rate increase from minus 0.1% in March.
However, despite this news, it is worth noting that there has been no clear indication from either the Bank of Japan or any government officials that they are intervening in the currency market to support it. It is possible that this sharp rebound is simply due to market forces and not government intervention. Additionally, while some analysts believe that government intervention may occur in the near future, others are more cautious and suggest that any intervention would likely be limited and only temporary.
