Japanese Yen: Softer footing risk as intervention fades – DBS

FXStreet Insights Team FXStreet

DBS Group Research strategist Chang Wei Liang notes that USD/JPY has surged above the mid-162 area as markets probe Japanese authorities’ tolerance for further Japanese Yen (JPY) weakness. He highlights that the absence of fresh, forceful rhetoric from officials is encouraging shorts, while the previous restraint from implicit intervention threats is fading, leaving the JPY potentially on a softer footing despite solid Tankan survey data.

Markets test Japanese Yen tolerance

"USD/JPY has surged above mid-162 levels, with markets testing the Japanese authorities’ tolerance for JPY weakness."

"USD/JPY has accelerated higher after breaking through 162 yesterday, given no new rhetoric to deter shorts by government officials."

"Finance Minister Katayama only said that Japan will take “appropriate action at any time as necessary” yesterday, which has been interpreted by traders as the JPY being somewhat distant from the intervention threshold."

"The previous restraint on JPY weakness from implicit intervention threats is receding, and the JPY could be on a softer footing without more forceful rhetoric."

"Meanwhile, Japan’s Tankan for Q2 released today indicated a solid rise in sentiment across large manufacturing firms (22 vs Q1:17), helped by an exports boom and easing oil prices."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD remains below 0.7000 amid light trading

AUD/USD fills a modest bearish gap on Monday, but remains below 0.7000 in the Asian session amid holiday-thinned liquidity. The US Dollar attempts a bounce even as US bond yields pull back from multi-year highs, limiting the pair. Moreover, diminishing odds of another RBA rate hike in November cap the Aussie.

USD/JPY hovers above 158.00 amid Japan/ US holiday

USD/JPY extends its range-bound price action into a new week, trading above 158.00 as bulls remain on high alert amid speculation that authorities will step in to prop up the Japanese Yen. Meanwhile, softer US bond yields keep US Dollar bulls on the back foot and cap the pair's upside. However, geopolitical uncertainties could limit losses for the safe-haven buck amid thin liquidity due to a holiday in Japan and the US.

Gold remains vulnerable below $4,200 on Fed hike bets

Gold is under mild selling pressure on Monday, trading at around $4,170. The US Dollar advances modestly in thin trading, supported by bets that the Federal Reserve will hike rates at least one more time before year-end.

Bitcoin struggles as ETF outflows, geopolitical uncertainty weigh

Bitcoin hovers around $83,600 on Monday after a 3.1% correction last week. US-listed spot ETFs recorded an outflow of $681.10 million last week, snapping the three-week inflow streak. Geopolitical uncertainty and mixed signals keep investors cautious.

The week ahead: A critical week as earnings and CPI test market

The Oil price is relatively stable this morning, and US and European stock markets are poised to open higher, as risk sentiment shrugs off an escalation in the Middle East and concerns about rising bond yields.

Has Bitcoin really escaped the macro forces it was built to fight?

Over 17 years ago, Satoshi Nakamoto designed Bitcoin (BTC) on the back of a global financial crisis as an alternative to the global monetary system outside the control of central banks, governments and traditional intermediaries. This raises a key question: has Bitcoin really become independent of the macroeconomic forces it was built to challenge?