Is Japan about to intervene to support the fast-weakening Yen?
There are two factors to the trade, first the dollar at a near six-month high on higher US yields, the other side is the Yen. Why hold the Japanese currency unless you need it for funding?
Yields here continue to scrape along the bottom, part of the policy of the Japanese government to avoid steering the economy back into its multi-decade policy of deflation and poor growth. Masato Kanda, Japan's vice-minister of finance for international affairs, AND central figure in the country's efforts to stem the sharp decline of the yen since last year, said overnight the Japanese Government "won't rule out any options if speculative moves persist." Japan last intervened in currency markets last year in September when the dollar rose past ¥145 yen, and again in October when USD/JPY hit ¥151.
(Video Transcript)
The US dollar
Now, are the Japanese authorities ready to intervene in the market? There are two factors to this trade. Let's take a look, first of all, at what's happening with the USD. This is the dollar basket rising to a six-month high yesterday, higher US yields, give an excellent reason to buy dollars, who wouldn't? The USD basket rose to 104.52 yesterday afternoon, the highest level since the 15th of March. It's now trading at 104.32, so not too far away from that recent high that you can see there. The other side is the yen. Why hold the Japanese currency unless you need it for funding?
USD/JPY
Yields here continue, it's expected to scrape along the bottom part of the policy of the Japanese government to avoid steering the economy back into its multi-decade policy of deflation and poor growth. So the Japanese yen, weakening as it is, this is the dollar rising against the Japanese currency. The USD/JPY rose to 147.82 in the early hours today, a level not seen since the 4th of November 2022. Masato Kanda, Japan's finance minister for finance for international affairs, and central figure in the country's efforts to stem the sharp decline of the yen since last year, said overnight the Japanese government won't rule out any options if speculative moves persist.
Japan intervened in the currency markets last year in September when the dollar rose past 145 to the yen, and again in October when it hit 151. So that could well be the trigger point, and if we see a continuation of this uptrend here for the dollar against that weaker Japanese yen, it could give more for people to see an upside to the Nikkei.
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