Yellen counsels caution on currency intervention after yen surge

U.S. Treasury Secretary Janet Yellen acknowledged sharp moves in the value of the yen this week, even as she declined to say whether Japan had intervened to support the currency.

“I’m not going to comment on whether they did or didn’t intervene,” Yellen told reporters Saturday following a speech in Mesa, Arizona. “I think that that’s a rumor.”

Still, she said the yen “did move quite a bit in a relatively short period of time,” adding, “we would expect these interventions to be rare and consultation to take place.”

Japanese authorities appeared to enter the market to support the yen on two occasions in the past week. One came after the yen weakened beyond 160 to the dollar for the first time in 34 years, followed by another after Federal Reserve Chair Jerome Powell said a hike was unlikely to be the U.S. central bank’s next interest-rate move.

Fed hikes weaken the yen relative to the dollar, so Powell’s comments made it easier for yen purchases to move the currency in the other direction.

Bloomberg analysis of the Bank of Japan’s current account data suggests Japan may have spent almost $60 billion on the actions. Near the end of the week, Finance Minister Shunichi Suzuki declined to confirm that Japan had intervened.

Yellen’s statements on Japanese intervention over the past two years have varied. She regularly points to a long-standing agreement among Group of Seven countries to allow the market to determine exchange rates. She has also said intervention can be justified only if it’s aimed at smoothing out volatility, but not to influence exchange rates. She repeated those points Saturday.

When Japan has previously intervened to strengthen the yen, however, she has avoided criticizing the moves.

Yellen was in the battleground state of Arizona to speak about the Biden administration’s economic policies. She also spoke Friday in Sedona to say that a turn away from democracy in the U.S. would undermine the country’s economic strength.