Japan and South Korea conduct rare dollar-selling interventions, yen jumps 3%, won hits nine-month high

Japanese and South Korean authorities intervened in currency markets on Thursday, with Japan conducting massive yen-buying and South Korea selling dollars, triggering sharp rallies in both the yen and the won. The yen surged as much as 3.3% against the dollar in New York trading, its biggest intraday jump in more than two years, while the won strengthened 2% to its strongest level since October.

The intervention

Japan's finance ministry declined to confirm the action, but the Nikkei newspaper reported the intervention citing market sources. U.S. authorities also conducted "rate checks," a step often seen before official intervention, signaling that Washington was working with Tokyo to stem the yen's decline. Finance Minister Satsuki Katayama sidestepped questions on Friday, hinting at support from overseas counterparts. In Seoul, a market source told Reuters that foreign exchange officials "conducted rare dollar-selling intervention overnight." The source declined to be identified. The Bank of Korea's move came after the won had tumbled to a 17-year low of 1,561.50 per dollar last month. It has since rebounded more than 8% in July, putting it on track for its biggest monthly gain since March 2009.

Currency moves

The dollar fell to a more than two-month low against the yen, ending Thursday at 159.225, down 2.6%. The yen's rally was the largest since at least early 2024, as markets had been on alert for intervention after months of warnings from Japanese officials. The won closed at 1,418.0 per dollar, its strongest since October 20. Both currencies have been battered by a strong dollar and rising energy import costs, with the Middle East conflict adding to price pressures.

Inflation backdrop

Tokyo's core consumer price index, which excludes volatile fresh food, rose 1.9% in July from a year earlier, accelerating from 1.6% in June and exceeding the median forecast of 1.7%. A narrower measure that also strips out fuel costs, closely watched by the Bank of Japan as a gauge of trend inflation, climbed to 2.0% from 1.9% in June. The data suggests broadening price pressures that keep the central bank on a path toward further rate hikes, even as the core reading remained below the BOJ's 2% target for a sixth straight month.

BOJ decision ahead

The BOJ is widely expected to keep interest rates steady at its meeting on Friday, after raising them to a 31-year high of 1% in June. Attention will focus on Governor Kazuo Ueda's post-meeting press conference for any signals on the timing of additional tightening. Analysts said that if policymakers want to capitalize on the yen's renewed momentum, even a hint of hawkishness could help sustain the currency's gains. The central bank faces mounting inflationary pressure from the Middle East war and the weak yen, which has inflated the cost of imported energy.

Coordinated action

The interventions follow weeks of public coordination between Tokyo and Seoul. On July 2, South Korea's vice finance chief said Seoul was closely communicating with Japan and other key allies on foreign exchange issues. Japan's top currency diplomat followed on July 7, saying Tokyo was in close contact with Seoul's foreign exchange officials because the financial markets of the two countries sometimes exhibit similar movements. The suspected joint action, with apparent U.S. backing through rate checks, marks a rare coordinated effort to stabilize Asian currencies against a strong dollar.