On Friday, the yen experienced a sudden strengthening, prompting market speculation regarding a possible rate check by authorities, which is frequently seen as a precursor to intervention. Meanwhile, the dollar was on track for its most significant weekly decline since June, as geopolitical tensions continued to unsettle investors. The yen was last observed slightly stronger on the day at 158.05 per dollar. The currency had depreciated to a soft level of 159.2 per dollar, nearing 18-month lows, during a press conference by Bank of Japan governor Kazuo Ueda following the BOJ’s decision to maintain rates. However, it then experienced a sudden appreciation to 157.3 per dollar.

Market participants are closely monitoring the potential for intervention from Tokyo to address the decline of the Japanese currency. However, the prevailing market sentiment suggests that authorities have not engaged in direct intervention but have conducted rate checks with banks. I believe this was not an intervention, as it does not align with the patterns we have observed in previous instances when they have taken action. “Typically you get a very big move down in dollar-yen,” stated Jonas Goltermann. He also indicated the potential for a so-called rate check. A rate check—inquiring about the price for selling yen—serves as a tool for Japanese authorities to indicate their willingness to engage in the market. The finance minister of Japan refrained from providing any comments.

The yen has faced continuous pressure since Sanae Takaichi assumed the role of Japan’s prime minister in October, declining over 4% due to fiscal concerns and remaining close to levels that have triggered verbal warnings and fears of intervention. This week’s bond market turmoil highlighted investor concerns regarding Japan’s fiscal situation, particularly following Takaichi’s announcement of a snap election for February and her commitment to tax cuts, which resulted in Japanese government bond yields reaching unprecedented levels. They have shown some recovery since that time; however, investor sentiment continues to be cautious. This week, the changing geopolitical landscape has impacted sentiment, particularly after Trump announced that he had secured U.S. access to Greenland through a NATO deal.

This development coincided with his decision to ease tariff threats against Europe and to dismiss the idea of taking Denmark’s autonomous territory by force. The dollar has faced significant pressure from investor concerns in the currency markets, as U.S. assets were heavily impacted at the beginning of the week due to escalating geopolitical tensions. This situation has reignited discussions about the ‘Sell America’ trade that surfaced following Trump’s extensive Liberation Day tariffs last April. The dollar index was last recorded at 98.31, while the euro and sterling held weekly gains. Thierry Wizman noted that although the Greenland deal addresses urgent concerns, it fails to resolve the deeper issue of strained alliances, warning that this is not a favorable position if one aims to safeguard the dollar’s reserve-currency status.