An extraordinary co-ordinated intervention in currency markets by the US and Japan could have huge ramifications for investors – including Australian super fund members.
US President Donald Trump may be best known for hyperbole, but he can be a master of understatement, too.
“Japan’s always been very good to us – with the exception, of course, of Pearl Harbour,” he told reporters on Air Force One on Sunday night.
Trump was responding to questions about why the United States had joined Japan in spending billions of dollars to intervene in foreign exchange markets to prop up the value of the yen, which slid to a 40-year low against the US dollar last week.
The intervention, confirmed on Monday, is the first time the US and Japan have stepped into FX markets in a co-ordinated way since June 1998.
At its heart, the weak yen is a story about interest rates. Despite inflation returning to Japan’s economy in recent years, the Bank of Japan has kept interest rates extremely low relative to the US and other countries, which encourages investors to borrow cheaply in yen and invest in higher-yielding assets overseas.
Source: https://www.afr.com/chanticleer/this-hasn-t-happened-in-markets-in-28-years-it-could-mark-a-new-era-20260803-p60kzr