Yen intervention looming as USD/JPY approaches 150? Maybe not
Dollar strength is keeping the heat up on the yen, which is now trading at just below the prior intervention trigger of ¥150.
But it may be different this time around. Why? Overnight, Finance Minister Shunichi Suzuki repeated his warning against speculative moves on the yen, but this time last year at ¥150 US rates were far lower than they are now, and some analysts are saying this gives the Japanese authorities far less room to move. The answer? Possibly to start raising the Japanese short-term interest rate target of -0.1%.
USD/JPY
There is speculation about whether the Japanese government will step in to strengthen the USD/JPY. The Finance Minister of Japan has warned against any speculative moves on the yen and mentioned that they will respond if the currency becomes too volatile. However, there are differences compared to last year's intervention that might prevent it from happening this time. One major difference is that the US interest rate has increased, which creates a different situation. The Japanese authorities may need to raise their benchmark interest rate to influence the strength of the JPY.
The interest rate environment
Last year, the Japanese authorities intervened in the currency market when the dollar reached its peak against the yen. They did this to strengthen the yen and reverse the trend of the dollar. Now, traders are watching closely to see if intervention will happen as the exchange rate approaches the 150 level. However, there is uncertainty about whether intervention will occur this time. One reason is that the interest rate environment has changed, with multiple increases in the US. This makes it more difficult for the Japanese authorities to have an impact on the yen's value.
The situation is very different from last year, and traders are eagerly waiting to see if the Japanese authorities will step in. The market has not yet reached the 150 level, but it is getting close. The outcome will depend on various factors, including how the yen's value evolves and whether the Japanese authorities believe intervention is necessary.
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