World Markets React to U.S. and Japan’s Currency Intervention
World shares presented mixed performances on Monday following the U.S. and Japan’s confirmation that they intervened to bolster the Japanese yen against the U.S. dollar. Concurrently, oil prices experienced a sharp decline after U.S. President Donald Trump stated he would instruct U.S. forces to avoid attacks on Iran, suggesting that a deal to cease Middle East conflicts was imminent. This statement came after he previously expressed doubts about the progress in negotiations with Iran and hinted at potential military actions.
The dollar fell to approximately 155.20 yen after intervention was confirmed. Last week, the dollar traded near 164 yen, a 40-year high against the yen. By late Monday in Tokyo, the exchange rate was at 156.68 yen per dollar. A weaker yen increases profits for Japanese companies with international operations, enhancing their value in yen terms, and attracts foreign tourists due to more favorable purchasing power within Japan. However, a weaker yen also raises Japan’s import costs, affecting essentials like oil.
The dollar’s strength often serves as a haven for investors in uncertain times, including war. Trump praised the dollar’s rising value but noted that a weaker dollar could make U.S. exports more competitive. Analysts indicated that the U.S. Treasury purchased yen via the Federal Reserve Bank of New York to support the yen’s value. Stephen Innes of SPI Asset Management remarked that this action showed coordinated U.S. support in Tokyo’s efforts to stabilize their currency.
Elsewhere, the euro weakened slightly to $1.1527 from $1.1549. European markets showed positive trends with Germany’s DAX rising by 1.3% to 25,963.51 and France’s CAC 40 increasing by 1% to 8,596.56. The UK’s FTSE 100 remained relatively stable at 10,861.95. U.S. stock futures also climbed; the S&P 500 futures increased by 0.5% and Dow Jones Industrial Average futures rose by 0.6%.
In Asia, Japan’s Nikkei 225 index dropped by 0.9% to 63,754.90, while South Korea’s Kospi fell substantially by 5.1% to 6,257.45, despite a previous surge of 17.9% on Friday. This dramatic rise followed earlier significant losses and was driven by major tech firms like Samsung Electronics and SK Hynix, which saw their shares rise over 25% on Friday before declining by 8.8% on Monday. Hong Kong’s Hang Seng index gained 0.5% closing at 26,009.40, while the Shanghai Composite index decreased by 0.6% to 3,809.66.
In other Asia-Pacific markets, Australia’s S&P/ASX 200 saw a slight increase of 0.2% to 8,996.90, Taiwan’s Taiex rose by 0.6%, and India’s Sensex advanced by 0.8%. The anticipation of reduced Middle East tensions led to Brent crude, the global oil benchmark, dropping 4.7% to $83.92 per barrel, while U.S. benchmark crude fell 5.6% to $79.89 per barrel.
U.S. stocks concluded July with gains. On Friday, the S&P 500 rose by 0.7%, the Dow industrials increased by 0.5%, and the Nasdaq composite jumped by 1%. The stock market faced fluctuations due to rising oil prices linked to the Iran conflict and concerns over tech sector investments in artificial intelligence. Amazon stood out with a significant 15.3% increase in share price after reporting unexpectedly strong quarterly profits, driven partly by the growth of its cloud computing division.
Contributed by Associated Press reporters Mayuko Ono and Mari Yamaguchi in Tokyo.