Currency wars Japan and Korea shed billions of dollars for

Currency wars: Japan and Korea shed billions of dollars for intervention

  • Japan and Korea have invested billions of dollars in the foreign exchange markets to support their currencies against the dollar.
  • Japan spent as much as 2.8 trillion yen ($19.35 billion) last week to support the yen in its first market intervention since 1998.
  • The dollar was initially pushed down from 145 yen but has since recovered and is trading at 144 yen.

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Japan and Korea have pumped billions of dollars into the foreign exchange market to prop up the value of their respective currencies against the US dollar, which has swept through most of its rivals this year.

Japan spent as much as 2.8 trillion yen ($19.35 billion) in support of the yen last week, a Treasury Department note on Friday showed. The record amount represents 15% of the funds available for intervention efforts, Portal reported. This week’s market intervention was the country’s first since 1998.

South Korea sold $15.41 billion in the second quarter, the Bank of Korea said in its quarterly intervention statement. According to Bloomberg, that was the largest amount since the central bank began publishing numbers in 2019.

This year the dollar is up 26% against the yen and 21% against the won.

Asian currencies, along with other developed and emerging market currencies, have tumbled against the dollar as the US Federal Reserve’s aggressive interest rate path acts as a strong driver of greenback strength. The Fed issued its third straight 75 basis point rate hike this month and its fifth rate hike of the year in a bid to bring down inflation.

The yen and won were also hurt in part by trade deficit concerns as both economies are oil importers, which have skyrocketed in price this year following Russia’s invasion of Ukraine seven months ago.

Japan’s intervention sent the dollar down from around 145 yen to 141 yen, but the greenback has almost recovered ground. The dollar rose 0.2% on Friday to 144.66 yen.

The greenback rose 0.4% against the South Korean currency on Friday, buying 1,436 won. It rose 11.5% in the three months to June, the quarter for which the Bank of Korea issued its notification on Friday.