The United States and Japan Relaunch the Yen, But Bitcoin Defies Market Fears

The yen experienced a strong rebound after a coordinated intervention by the United States and Japan in the foreign exchange market. This development quickly caught investors’ attention, as a strengthening of the Japanese currency had already caused strong shocks to bitcoin in 2024. However, the most recent data shows a different situation. The evolution of the correlation between the two assets now suggests that the strength of the US dollar could play a more important role.

The yen jumps after the joint action of the United States and Japan

US Treasury Secretary Scott Bessent confirmed that the United States participated in a coordinated intervention with Japan last Friday. This operation aimed to limit what was deemed disorderly fluctuations of the yen in the foreign exchange market. The USD/JPY pair had previously approached the threshold of 164, its weakest level since 1986, before returning around 156.5 on Monday.

Scott Bessent also indicated that Washington remains ready to participate in new joint interventions if the situation requires it. He specified that his country supports the measures taken by Japan to correct the significant undervaluation of the yen. This statement comes as markets closely monitor currency movements and their effects on financial assets.

The memory of the 2024 shock remains present for bitcoin

In August 2024, the cryptocurrency market experienced a brutal correction after the unwinding of yen carry trades. At that time, the Bank of Japan raised its key interest rate to 0.25%, rapidly strengthening the yen. Investors using high leverage then sold risky assets to cover their losses denominated in Japanese currency.

In this context, bitcoin fell from about 62,000 dollars to nearly 49,000 dollars in one week, a drop close to 20%. Since then, the Bank of Japan has raised its rates to 1% and kept them at that level last week. Its governor, Kazuo Ueda, explained that demand related to AI as well as the weakness of the yen continue to fuel inflation above 2%.

A correlation that questions the expected scenario

Despite market expectations, data analyzed by CoinDesk shows a different development this time. The 52-week rolling correlation between bitcoin and the USD/JPY pair reached -0.90. This result indicates that bitcoin has recently moved in the same direction as the weakening of the yen, contrary to the scenario generally associated with carry trades.

The analysis thus suggests that the strength of the US dollar could explain a large part of the observed movements. At the same time, Japanese bond yields continue their rise, with the 30-year rate close to 4%. Despite this development, the bitcoin price remained stable above 63,000 dollars at the time of writing.

The yen rebound has, therefore, not caused the same shock as in 2024 on Bitcoin. Despite tensions in the foreign exchange market, BTC shows better resilience and now seems more influenced by the dynamics of the US dollar. The upcoming decisions of monetary authorities and the evolution of the dollar should now be closely watched to assess whether this new dynamic is confirmed in the markets.