Published by Global Banking & Finance Review®
Posted on December 22, 2025
4 min readLast updated: January 20, 2026
Add as preferred source on GoogleThe yen rose against the dollar on intervention hints and a weaker dollar. Despite BOJ rate hikes, the yen's recent decline raises intervention possibilities.
By Gertrude Chavez-Dreyfuss and Amanda Cooper
NEW YORK/LONDON, Dec 22 (Reuters) - The yen strengthened against the U.S. dollar on Monday on a technical recovery after Japanese officials warned against "one-sided and sharp" currency moves, signaling readiness to take appropriate action in what analysts viewed as a clear hint of intervention.
The Japanese currency also gained support from a broadly weaker dollar, which has been under pressure since the Federal Reserve's 25 basis-point rate cut at its December 10 policy meeting, analysts said. U.S. rate futures have also priced in two rate cuts next year.
The yen has fallen in recent sessions against the dollar despite the Bank of Japan raising interest rates to 0.75% from 0.5% last Friday, taking borrowing costs to a level unseen in 30 years. It is poised to end December lower, for a fourth consecutive month.
"Overall, the Japanese yen has sunk for reasons beyond the interest-rate hike from the BOJ which was heavily priced in. One thing is that the rate down the line may not be moved unless there is evidence of improved fundamentals," said Juan Perez, director of trading at Monex USA in Washington.
"There is little to give much confidence about the yen...and now we need to watch for the possibility...of an FX intervention. But when that has happened the last few times it accomplished little while being very expensive," he added.
Atsushi Mimura, Japan's top currency diplomat, told reporters on Monday that recent FX moves were one-sided and sharp, adding that the government will take appropriate action against excessive moves.
Chief Cabinet Secretary Minoru Kihara also warned about the yen's continued weakness and said it was important that "the currencies should move in a stable manner, reflecting fundamentals."
Marc Chandler, chief market strategist at Bannockburn Global Forex in New York, said the verbal intervention "makes sense after the rate hike," noting that potential Japan action to boost the yen was unlikely until the BOJ raised rates.
"Now that the BOJ raised rates, they can say that they've tightened monetary policy and that the yen is deviating from fundamentals. And so you've got a bit of short-covering on the yen as a result," he added.
In afternoon trading, the dollar fell 0.5% against the yen to 156.94 yen, falling as low as 156.71. It was on track for its largest one-day decline since late November.
DOLLAR ON PACE FOR BIGGEST DECLINE SINCE 2017
The dollar index slid 0.4% to 98.3, led by losses against the euro and yen. The index was on course to post its biggest yearly fall in eight years.
The euro rose 0.4% against the dollar to $1.1753, advancing after four straight days of weakness last week. The European Central Bank left euro zone rates unchanged and effectively closed the door on rate cuts any time soon.
The decision had been widely expected, however, and ECB President Christine Lagarde has said numerous times the central bank is "in a good place" on monetary policy.
Sterling was also higher on Monday against the dollar at $1.3458, up 0.6%, having ended the previous week fairly flat after the Bank of England cut rates. The BoE, however, suggested that there may not be many more rate cuts in the pipeline, given that inflation remains well above the central bank's target.
The pound has risen 1.1% so far this month, bringing the gain for the year to around 7%.
The euro earlier hit a record high versus the yen of 184.92 , while the Swiss franc also rose to an all-time peak of 198.4 yen.
However, both pulled back a little bit, with the euro last down 0.1% on the day at 184.49 yen, while the Swiss currency last changed hands at 198.32 yen, still up 0.6%.
JAPAN POLICY CLUES
One of the drivers of yen weakness in recent weeks has been Prime Minister Sanae Takaichi's spending plan to boost growth and the impact that might have on Japan's already strained finances.
BOJ Governor Kazuo Ueda is due to speak at Japan's Keidanren business lobby on December 25, which may offer markets another opportunity to parse any policy clues.
Total spending in Japan's draft budget for fiscal 2026 will probably exceed 120 trillion yen ($775 billion) to hit a new record, two government sources familiar with the matter said last week.
(Reporting by Gertrude Chavez-Dreyfuss in New York and Amanda Cooper in London; Additional reporting by Kevin Buckland in Tokyo and Gregor Stuart Hunter in Singapore; Editing by Shri Navaratnam, Kate Mayberry and Toby Chopra)
Foreign currency refers to any currency that is not the domestic currency of a country. It is often used in international trade and investment.
Monetary policy is the process by which a central bank manages the supply of money and interest rates to achieve specific economic goals.
Currency hedging is a financial strategy used to reduce the risk of adverse price movements in foreign exchange rates.
Financial markets are platforms where buyers and sellers engage in the trade of assets such as stocks, bonds, currencies, and derivatives.
Economic growth is the increase in the production of goods and services in an economy over a period of time, typically measured by GDP.
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