The dollar spiked after the intervention as much as 4 percent past 79 yen from around 75.65 yen. The dollar touched a record low of 75.31 yen earlier on Monday.
Finance Minister Jun Azumi said Tokyo stepped into the market for the second time in less than three months on its own at 10:25 a.m. local time (0125 GMT) and would continue to intervene until it was satisfied with the results.
The Yen is considered safe haven and there have been other recent interventions:
Monday’s maneuver was the fourth time in just over a year that Japan has intervened to stem the yen’s rise.
The BBC reports the Yen dropped 5% to the dollar after the move. One must wonder why is such speculation going on with the Yen, which is considered save haven. It seems in spite of the big Greek debt haircut and U.S. Q3 GDP of 2.5%., markets are leery and believe little has be resolved.
Shockers of all shockers, China let the yuan rise against the dollar.
China's central bank, after setting the mid-point for Monday's trading range, let the yuan rise 0.42 percent to 6.7976 per dollar—both the biggest daily gain and the highest close since China revalued the currency and introduced a managed float regime in 2005.
At one point, the yuan was up as much as 0.47 percent from the day's mid-point—just shy of the currency's 0.5 percent limit, which had rarely been tested in practice in the past.
Traders said the lack of intervention by the central bank suggested it wanted the market to drive intraday trade and so underline its weekend pledge.
But it also showed it had ultimate control by setting the reference rate, around which the yuan can trade, at the same level as Friday's fixing.
While today we actually saw a rise in the yuan, don't be so convinced this was a real policy change. China may simply be trying to get international pressure off their banks in order to not be labeled a currency manipulator. China has a long way to go to let the currency re-evaluate to it's true value. Current estimates say the Renminbi is undervalued by 23% to 40%.
The Baseline Scenario blog has some interesting insights into U.S. Treasury Secretary Geithner's upcoming China trip.
So what should we expect from Geithner’s upcoming China trip?
Not much.
China refuses to talk politely about its exchange rate and rebuffs all sensible diplomatic initiatives on this front – they have held the IMF at bay for nearly 2 years on this exact issue. The rhetoric is that their fiscal stimulus will bring down their current account surplus without need for significant exchange rate appreciation. This is smokescreen.
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