Bank of Japan intervenes in foreign exchange markets after yen falls to 24-year low

The Bank of Japan conducted the first intervention in the foreign exchange market in 24 years, after the Japanese central bank kept its benchmark interest rate low for a while. Following the intervention, the yen rallied as the U.S. dollar fell sharply against the Japanese yen during Friday’s trading sessions.

The fall in the yen leads the Bank of Japan to buy intervention in the foreign exchange market for the first time in more than two decades.

The U.S. dollar has been a dominant force in the world of fiat currencies and, most recently, the Japanese yen, which fell to a 24-year low, prompted the Bank of Japan to intervene. Reuters detailed on Friday that this was the first time the Japanese central bank had intervened in the currency markets since 1998 to boost the falling currency. This is the first buying intervention since 1998. The Bank of Japan had indeed sold yen using physical intervention methods in 2011.

Following the intervention, the Japanese yen recovered, but the JPY/USD exchange rate still shows that the yen has fallen significantly against the greenback over the past six months. Speaking to Steve Goldstein, author of marketwatch.com, Michael Hewson, chief market analyst at CMC Markets U.K., questions the yen’s long-term decline.

“The big question is whether this will make a difference and change the long-term direction of the Japanese yen’s decline“, Hewson said on Friday. “The 145/146 level does seem to be a level that the Bank of Japan seems to want to defend for the time being given that last week’s rate check occurred around similar levels.“

Chinese yuan, European euro and many other fiat currencies are under attack from the greenback

The yen is not the only fiat currency in trouble, as the Chinese yuan has continued to depreciate against the dollar. After reaching parity with the U.S. dollar again this week, the euro is now at $0.98 against the dollar. today

Masato Kanda, Japan’s vice minister of finance for international affairs, explained that the recent 24-year decline in the yen has led authorities to “take decisive action in the foreign exchange market.“The U.S. Dollar Index (DXY) chart climbed to 111.448 and the yen’s gains in morning trading sessions were slowly erased. In addition to a large handful of fiat currencies, precious metals and stocks are also feeling the effects of the U.S. dollar this Thursday afternoon (ET).