US dollar weakens sharply against the Japanese yen after market interventions

[AP Photo]

The U.S. dollar weakened sharply against the Japanese yen after U.S. President Donald Trump and Japan’s finance minister confirmed both sides had intervened in markets.

Before late last week, the dollar was trading above 163 yen, touching 40-year highs. After regulators were suspected of stepping in, it fell below 160 yen.

Early yesterday, after the official announcement of the intervention, the dollar fell to nearly 155.20 yen. That’s a big drop for the exchange rate. The dollar was trading at 156.75 yen late yesterday afternoon.

Even though it has attracted millions of bargain-hunting tourists, the yen’s prolonged weakness against the dollar has been a source of frustration for Tokyo. Since Japan imports so much of what it consumes, a weak currency pushes prices higher. High oil prices have amplified that problem and that’s putting pressure on Tokyo to do more to address the rising cost of living.

Efforts earlier this year to raise the value of the yen against the dollar did little to budge the exchange rate.

Foreign exchange markets determine the relative values of currencies, but there are many factors that shape what happens in the markets.