US and Japan intervene to boost dollar against yen


Economics Editor

The dollar rose above 90 yen for the first time since mid-March yesterday following joint intervention by the US Federal Reserve and the Bank of Japan and surprise measures announced by the Japanese Ministry of Finance to stimulate overseas investment by institutional investors.

The sharp rise took the dollar to Y90.85 at the end of the London session, up nearly Y3 on yesterday's close of Y88.05 in New York. The dollar also rose 2 pfennig against the German mark at the end of London trading compared with New York's close of DM1.3764 the previous day.

The pound had a good day, helped by the recovery of the dollar against the German mark. It ended at DM2.2360, up 3 pfennig on Tuesday's close.

According to Lee Ferridge, currency strategist at NatWest Markets, sentiment was improved by better-than-expected trade figures and a tempering of Bank of England concern about inflation prospects. The pound was also helped by speculation in the markets about a fall in German interest rates.

The FT-SE 100 index surged 1.5 per cent to above 3,500, within reach of its all-time closing high of 3,520.3, while the German DAX put on 0.97 per cent. On Wall Street, the Dow Jones Industrial Average rose 54 points at one stage, but retreated to close 10.22 points down at 4,690.95.

The joint intervention in the markets by the US and Japanese authorities was the first since 7 July and confirms suspicions that a "reverse Plaza" agreement has been reached to weaken the yen. The original Plaza agreement in 1985 was a deal to weaken the dollar. The Federal Reserve Bank of New York was purchasing dollars at a rate of Y90.95.

The US government, which appeared happy to allow the yen to soar earlier in the year, changed its tune at the end of June when it drew back from its threat to impose trade sanctions on luxury car imports.

Brendan Brown, economist at Mitsubishi Finance International, said: "The US authorities are acutely aware of the risk of an implosion of the Japanese financial system. They now take the view that this must be avoided at all costs."

The package of measures announced by the Japanese Finance Minister, Masoyoshi Takemura, was designed to get institutions to start investing overseas again after huge losses on foreign investment since the mid-1980s. The principal changes involve the accounting methods used by institutions to value foreign portfolios.

Mark Cliffe, international economist at HSBC Markets, said the chief importance of the package was symbolic, showing how serious the Ministry of Finance was about driving the yen down. "This package will further change the foreign exchange market's perceptions of Japan's determination to drive down the yen - and to that extent it has already succeeded."

UK market strategists said the Japanese move had had a big impact on bond and equity markets worldwide.

Life and Style
food + drink
Arts and Entertainment
musicBand's first new record for 20 years has some tough acts to follow
Shoppers in Covent Garden, London, celebrate after they were the first to buy the iPhone 6, released yesterday
Liam Payne has attacked the media for reporting his tweet of support to Willie Robertson and the subsequent backlash from fans
peopleBut One Direction star insists he is not homophobic
Life and Style
healthFor Pure-O OCD sufferers this is a reality they live in
Arts and Entertainment
A bit rich: Maggie Smith in Downton Abbey
tvSeries 5 opening episode attracts lowest ratings since drama began
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Quantitative Risk Manager

Up to £80000: Saxton Leigh: My client, a large commodities broker, is looking ...

Day In a Page

A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments