Currency interventions are significant events that attract close attention. The US often uses this issue as one of the criteria for its Monitoring List, signaling close scrutiny of countries on the list. However, recently the US itself stepped in to intervene to help support the yen and prevent it from weakening further.
Why did the US take this action, and what impact might it have on Thailand?
The yen has been depreciating continuously. On 23 July, it fell to its weakest level in 40 years, reaching 164 yen per US dollar. In response, the US and Japan announced a historic currency intervention—the first since 1998—with the US selling euros to buy yen to assist Japan.
Almost every time the yen weakens, Japan seeks solutions, sometimes adjusting policy interest rates or directly intervening in the yen currency market, often spending trillions of yen. This time, the US stepped in because Japan might have to sell over 1.11 trillion US dollars worth of US government bonds it holds, which would push US bond yields higher.
Wachirawat Banchuen, Senior Financial Market Strategist at Siam Commercial Bank, explained to Thairath Money that The US usually monitors countries that intervene to weaken their currencies, but this case is different because the US acted to strengthen the yen. This move aims to prevent negative effects on its own assets and is believed to ease concerns about large-scale bond sell-offs and unwinding of carry trades.
However, the yen’s depreciation may be temporary, as the key factor remains the "policy interest rate differential," which keeps borrowing in yen cheaper than other currencies. For the yen to strengthen sustainably, the Bank of Japan (BOJ) may need to raise interest rates sooner than expected, while the US Federal Reserve (Fed) should avoid aggressive rate hikes. Currently, markets expect one to two more hikes in the near term.
It is expected that US-Japan cooperation will keep the yen at around 155-157 yen per US dollar by August 2026. The initial impact on the Thai baht is a strengthening trend, with a range of 21.00-21.50 baht per 100 yen this month.
Dr. Phiphat Luangnarumitchai, Chief Economist at Kiatnakin Phatra Financial Group (KKP), explained that Japan often supports its currency. On one occasion, it spent over 8.5 trillion yen, causing an immediate 3% appreciation. The US involvement this time may be aimed at changing market sentiment.
Currently, due to a "wide interest rate differential," the yen is considered a low-cost funding currency globally. Investors borrow yen to invest in higher-yielding assets—a strategy known as Yen Carry Trade. This has been profitable enough that the market believes "selling yen is always right," creating a one-sided bet. The intervention aims not to alter fundamentals but to shift market belief from a one-way bet back to a two-way market, Dr. Phiphat said.
There are two main reasons why the US chose to assist Japan:
1) Financial market stability: If the yen continues to weaken, carry trades might return, increasing the risk that global investors will rush to sell assets, impacting both stock markets and US government bond markets.
2) Trade and competitiveness: The US stresses that the yen is undervalued. A weaker yen makes Japanese goods cheaper for American consumers, undermining the effect of US tariffs designed to reduce trade deficits.
Currency intervention is a critical factor used by the US Treasury to decide if a country should be placed on the Monitoring List—a list of countries suspected of currency manipulation. Currently, there are three main criteria:
1) Having a significant surplus in goods and services trade with the US, defined as more than 15 billion US dollars.
2) Running a current account surplus greater than 3% of GDP.
3) Continuous currency intervention, with net foreign exchange purchases exceeding 2% of GDP and net purchases in more than 8 out of 12 months.
Meeting any two of these three criteria results in immediate placement on the Monitoring List. Thailand is among these countries because it meets the trade surplus and current account surplus criteria. Although recently Thailand only meets one criterion—trade surplus—the latest report published on 24 July 2026 (using data from January to December 2025) still includes Thailand because the US Treasury requires countries to be monitored for at least two consecutive assessment periods.
Therefore, if Thailand maintains only one criterion in the future, it will eventually be removed from the Monitoring List.
Ultimately, in a globally interconnected financial world, investment in any asset is interrelated. Problems with the yen can shake the US economy and subsequently impact the Thai stock market and currency. Diversifying risk to maintain portfolio balance is important, and close monitoring of developments is essential.
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