Japan and South Korea have taken action to buy their own currencies in the open market in an effort to support exchange rates, according to sources who described it as a rare and unprecedented coordinated market intervention, possibly involving the United States.

During Thursday's New York trading session, the yen surged as much as 3.3% against the dollar to 157.98, marking its largest single-day gain since December 2023. However, the dollar-yen pair later rebounded to 160.49 as of the latest report. Market sources cited by media indicate that the Japanese government and the Bank of Japan executed yen-buying, dollar-selling intervention, while US monetary authorities conducted a "rate check" as a pre-intervention step. This suggests a joint effort by Japan and the US to curb the yen's depreciation.

The involvement of the United States has amplified the impact of this intervention, potentially making yen bears more cautious. US Treasury Secretary Scott Bessent stated in an interview that he believes the yen is "significantly undervalued" and that "excessive volatility" is detrimental to market health.

Japan's top currency official, Atsushi Mimura, said on Friday that Japan has received more than just moral support from the US. Finance Minister Katsunobu Kato declined to comment on whether intervention had occurred, but reiterated that authorities are always prepared to respond with a high sense of urgency.

The timing of the yen's strengthening coincided with a similar move in the South Korean won, which rose 2% on Thursday to its highest level in nine months. A source revealed that South Korea's foreign exchange authorities conducted a rare dollar-selling intervention.

Lee Min-hyuk, an analyst at KB Kookmin Bank, noted that "the interests of each country have aligned. For Japan and South Korea, the correlation between the won and yen is very strong, so a joint intervention could have a double effect." He added that "from the US perspective, both South Korea and Japan need to invest in the US. Given the unusually high exchange rate levels recently, the US likely also wants the rate to fall."

With the Bank of Japan keeping its policy rate unchanged on Friday as expected, market focus has shifted to policymakers' comments and whether the central bank is preparing to continue raising borrowing costs. Masahiko Loo, senior fixed income strategist at State Street Global Advisors, commented that "the key signal from last night's market action is that the Ministry of Finance remains uneasy about the yen being too weak."

According to analysis by Brent Donnelly, a currency strategist and trader at Spectra Markets, Japan has coordinated exchange rate intervention with the US or other G7 partners five times since 1985, in addition to eight unilateral interventions. His analysis shows that most joint interventions have occurred at turning points in the dollar-yen trend.

Regarding the won, it fell to a 17-year low of 1,561.50 against the dollar last year but was trading at 1,437.62 on Friday, down nearly 1% on the day. The won has appreciated nearly 8% this month, driven by companies repatriating dollar funds. A source familiar with the matter said that SK Hynix, a South Korean memory chip giant, converted some of its proceeds from a $26.5 billion ADR issuance in the US earlier this month into won.

Lee Min-hyuk pointed out that "the market had been questioning whether the won would rebound after the SK Hynix ADR issuance. With the ADR completed and Japan intervening to support the yen, South Korean regulators may have seized this opportunity to push the currency lower and break market expectations for persistently high exchange rates."