The yen strengthens after Japan intervened to support the yen for the first time since 1998

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TOKYO/LONDON, Sept 22 (Reuters) – The Japanese yen strengthened sharply on Thursday after authorities intervened in the foreign exchange market for the first time since 1998 to prop up the struggling currency.

The dollar fell as low as 140.31 yen and was last down 1.2% at 142.37 in highly volatile markets.

The euro, Australian dollar and pound also fell against the yen. , ,

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“We have taken decisive action (on the foreign exchange market),” Deputy Finance Minister for International Affairs Masato Kanda told reporters, answering yes when asked if that meant a intervention. Read more

Japan’s first intervention in the foreign exchange market to support the struggling yen since 1998 came on the heels of the central bank’s decision to keep interest rates extremely low that sent the currency plummeting.

“What Japan is doing is sending a signal that it’s not a free ride to push the dollar/yen higher,” said Jane Foley, head of currency strategy at Rabobank.

However, she added, “Given that the BOJ just backed a very accommodative monetary policy and this came right after the Fed backed a hawkish outlook, I think the fundamentals will drive the dollar/yen higher.”

Even after Thursday’s moves, the dollar is still up 23.4% against the yen this year.

KING DOLLAR

In what turned out to be a very busy day for markets, the dollar hit multi-year highs earlier Thursday, a day after the Federal Reserve surprised markets with hawkish interest rate projections.

The dollar index – which measures US unity against a basket of six peers – earlier hit 111.81 for the first time since mid-2002.

The euro weakened to a new 20-year low of $0.9807, and the pound fell to a new 37-year low of $1.1213, although both regained some ground in trade in London.

The Bank of England is meeting later today, and the market currently sees around an 85% chance of a 75bp rate hike by the BOE, and 15% of a half-basis rate hike. point. 0#BOWATCH

On Wednesday, the Fed released new projections showing rates peaking at 4.6% next year with no cut until 2024. It raised its target interest rate range by an additional 75 basis points (bps) from the overnight at 3%-3.25%, as was widely expected. Read more

The dollar was already supported by demand for safe-haven assets after Russian President Vladimir Putin announced he would call up reservists to fight in Ukraine and said Moscow would respond with the might of all its vast arsenal if the West continued. what he called his “nuclear program”. blackmail” on the conflict there. Read more

THE SWISS FRANC FALLS

Elsewhere, the Swiss franc fell after the central bank raised rates by 75 basis points.

The dollar and euro both climbed more than 1% against the Swiss franc, with the dollar remaining at 0.9735 and the euro at 0.9620.

The Swiss National Bank raised its key interest rate to 0.5% from the minus 0.25% level it set in June – only the second increase in 15 years.

“I think the overreaction in EUR/CHF was due to the idea that the SNB might make 100 basis points, after the (Swedish) Riksbank earlier this week. I think the market reaction, the rally EUR/CHF, is a bit exaggerated.” said Chris Turner, global head of markets at ING.

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Reporting by Kevin Buckland in Tokyo and Alun John in London; Editing by Edwina Gibbs, Ana Nicolaci da Costa, Kim Coghill, Emelia Sithole-Matarise and Raissa Kasolowsky

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