USD/JPY intervention is a clear risk near 150, “hard to ignore”

The Bank of Japan will intervene in USD/JPY if Japan’s Ministry of Finance instruct it. The Ministry’s Vice Finance Minister for International Affairs Kanda is the official who will tell the BOJ to intervene, when he judges it necessary. He is often referred to as Japan’s ‘top currency diplomat’.

I posted this on what to watch for a heads-up:

Scotia analysts are eyeing 150 as a dangert zone:

  • Finance Minister Suzuki commented last week that the authorities would respond appropriately to ‘excessive moves’ in the exchange rate but beyond that, finance officials have been quiet on FX recently. Still, market participants understand that intervention is a clear risk if the USD nears the 150 level (spot peaked at 151.95 in October last year) and the charts suggest that, after the USD’s advance above the June high (just above 145), the risk of a retest of 150 is hard to ignore.
  • If JPY defence is a priority, direct FX intervention and allowing slightly higher domestic yields to coincide (even approximately) with a downturn in US bond yields (or some dovish cueing from Fed policymakers) would be optimal from a policy effectiveness point of view.

On that “dovish cueing from Fed policymakers”, I can’t see that on the horizon in the near term. Perhaps if US Treasury yields can fall there is a chance?

This article was written by Eamonn Sheridan at Source