Japan's yen surges after New York Fed conducts rate checks

By Tom Westbrook, Alun John, Anis mahmud and Hannah Lang

SINGAPORE/LONDON/NEW YORK, Jan 23 (Reuters) - The yen jumped suddenly against the U.S. dollar on Friday, with traders alert to the prospect of intervention from Tokyo to stem the Japanese currency's slide after the New York Federal Reserve conducted rate checks, a source told Reuters.

The New York Fed conducted rate checks on the dollar/yen pair around midday on Friday, a source familiar with the matter told Reuters.

The move saw the dollar fall from around 157.60 yen to as low 156.02 JPY=, its weakest level in three weeks, in about 1-1/2 hours. The greenback was last down 1.66% at 155.77.

Acting as fiscal agent for the U.S. Treasury, the NY Fed carried out the rate checks, the source said. The U.S. Treasury did not respond to Reuters’ requests for comment.

A "rate check" refers to the process where an authority, such as a central bank, contacts market participants to ask what price they would get if they enter the market, in order to gauge market conditions.

Checks would encourage banks to stop out positions that would suffer if the yen rose suddenly, explaining the sudden move higher in the yen.

Analysts said U.S. monetary authorities stepping into what began as a Japanese affair is not typical, but it is not without precedent.

“The Fed has asked for rates in USDJPY according to many reliable sources. This is USD bearish. Highly unusual. Strong signal," said Spectra Markets President Brent Donnelly.

Japanese Finance Minister Satsuki Katayama earlier in the session declined to respond when asked about talk of rate checks, but said authorities were watching currency markets closely.

"Has there been any formal confirmation that they have intervened? Not yet," said Eugene Epstein, head of trading and structured products at Moneycorp in New Jersey. "At a minimum there, it seems like they're probably checking rates."

The reason behind the first spike in the yen during Asia trading hours remains unclear.

Earlier on Friday the BOJ held rates steady. The yen began to weaken during a press conference by Governor Kazuo Ueda after the decision.

Traders also flagged how the market was already on edge.

"The market was positioned long USD-JPY going into the BOJ meeting and added to the longs post the event," said Nathan Swami, head of FX trading for Japan, Asia North and Australia at Citi in Singapore.

"We think the quick move lower in spot today was a result of stop losses getting triggered in a nervous market environment.”

A long position in an asset is one that expects it to rise, and a "stop‑loss" is an automatic order that takes effect when an asset falls to a preset price, triggering a sale to limit further losses.

Traders have been wary of intervention by Japanese authorities as the yen has approached 160 per dollar.

Whether actual intervention took place can sometimes be inferred from the data released by the BOJ on the next business day at 1800 JST (0900 GMT). In this case, it will be next Monday.

NOT THERE YET?

The initial view from analysts was that Friday's earlier move was not intervention.

"I don’t think it's from the BOJ, Mr. Ueda didn’t say anything much on FX intervention," said Shoki Omori, chief desk strategist for rates and FX, at Mizuho, in Tokyo.

"Looks like a tactical move from fast money thinking that hikes will come earlier than expected."

The yen has been under pressure since Sanae Takaichi took over as Japan's prime minister in October, dropping more than 4% on fiscal concerns and hovering near levels that have spurred verbal warnings and intervention fears.

A bond rout has underscored investor nerves about Japan's fiscal position as Takaichi called a snap election for February and promised tax cuts, sending government bond yields to record highs.

The weak yen meanwhile has drawn warnings from Japanese authorities they may intervene directly in markets to stem its slide.

Finance Minister Katayama said earlier in January she and U.S. Treasury Secretary Scott Bessent shared concerns over what she called the yen's recent "one-sided depreciation".

Tokyo last spent 5.53 trillion yen ($35.18 billion) in July 2024 intervening to haul the yen away from 38-year lows.

The currency has hovered near the weaker end of the 139-158 per dollar channel in which it has traded in 2025, even as interest rate differentials between the U.S. and Japan have narrowed recently.

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