The world's markets are very unsettled as the Japanese yen makes its biggest move in six months.
This move makes many believe that Japan, possibly with support from the USA, may intervene to stabilize the currency.
Warning of intervention in the yen
Japan's Prime Minister Sanae Takaichi warns of 'abnormal' yen movements. This causes the USD/yen rate to fall from nearly 160 to 155.6 yen per USD.
It was the yen's strongest level in 2026 and the fastest daily increase since August.
Traders say that short yen positions are at their highest level in ten years. This increases the risk of turbulence if the yen weakens further.
“With short yen positions at peak levels and elections coming up, we soon see that the authorities are ready to act again, especially if the currency weakens further,” writes market commentator Walter Bloomberg.
The Fed in New York contacted major banks regarding the yen. Such conversations often indicate that currency support may be coordinated.
In the past, joint actions between the U.S. and Japan have been very effective. In similar instances, such as the Plaza Accord in 1985 and the measures in 1998 against the Asian crisis, they stabilized the yen, weakened the dollar, and the world’s assets increased in value.
Experts suggest that coordinated intervention now could yield similar results as in 2008, with significant liquidity and support for markets globally.
“The Fed intervenes to save the yen,” says CFA Michael Gayed on X. If only Japan acts, the Bank of Japan may be forced to sell U.S. government bonds to acquire USD, which could worry global bond markets.
By collaborating with the U.S., one can avoid such problems while the dollar weakens and the yen receives support.
Global markets are preparing: Weaker USD, stronger Yen, and volatility in crypto.
Experts point to broad effects of such a move. If one sells USD to buy yen, the dollar weakens, which increases liquidity globally and benefits stocks, commodities, and crypto.
Bitcoin shows a strong positive correlation with the yen, and a negative relationship with USD.
A weaker dollar could prepare cryptocurrency markets for a revaluation, but in the short term, it is likely that we will see volatility as leveraged positions in yen are closed.
In August 2024, a small interest rate hike from the Bank of Japan strengthened the yen. This led to 15 billion USD worth of crypto being sold in six days. Bitcoin fell from 64,000 USD to 49,000 USD.
Risks for government bond bills and opportunities for investors: Here’s how to manage a strong yen and a weak USD.
U.S. government bonds are also an important issue. Analysts warn that concerns in Japan's bond market could spread to U.S. government bonds, affecting interest rates and safe assets globally.
The macroeconomic situation is also important, as a weaker USD can make the U.S. debt easier to manage and increase export competitiveness. However, markets may become shaky as traders adjust to the yen's rapid rise.
Therefore, the situation is both risky and historically positive for investors. If the Fed and Japan collaborate, it could trigger a broad market rally. Then, stocks, commodities, and digital assets receive long-term support.
However, in the short term, adjustments and liquidation pressure can create temporary issues, especially for leveraged positions in yen.
This explains why traders and policymakers closely monitor the yen, as the outcome can affect more than just the relationship between the dollar and the yen. It can also shape one of the year's most decisive macro trends.
