Japan bought billions of dollars to restrain a soaring yen on Friday, kicking off joint market intervention by the world's richest-nations to calm global markets made nervous by the threat of a meltdown at a nuclear power plant near Tokyo.
After a week of panicky trading, the US dollar surged two full yen to as much as 81.8 yen, leaving behind a record low of 76.3 hit on Thursday as the Bank of Japan stepped into the market. Traders and media reports estimated it bought more than $25 billion. Now the likes of the US Federal Reserve and the European Central Bank are set to join the action in the Group of Seven's first combined intervention in a decade.
"It's going to have a very huge resonating effect on the market," said Kathy Lien, director of currency research at GFT in New York. "Because the only type of intervention that actually works is coordinated intervention and it shows the solidarity of all central banks in terms of the severity of the situation in Japan."
The G7 announced its intent to jointly intervene after a short teleconference early on Friday in a demonstration of solidarity with disaster-hit Japan.