USD/JPY: Intervention risk caps upside – BBH

Brown Brothers Harriman’s Elias Haddad highlights that USD/JPY has tested the 160.00 resistance area, reviving intervention concerns after Japan’s large summer FX operations. Officials warn recent currency moves have been too fast. While ongoing Dollar strength keeps upside pressure on USD/JPY, the threat of renewed action is seen limiting sustained breaks above 160.00 and skewing risk against further JPY selling.

Key 160.00 level draws official focus

"USD/JPY tested key resistance at 160.00, putting intervention risks back in the spotlight. Indeed, Japan’s top currency official, Atsushi Mimura, warned “the currency moves over the past few days have been too fast…It’s too early to forget what happened this summer.”"

"As a background, Japan spent a record ¥15.4 trillion ($97bn, or roughly 10% of its FX reserves) to prop up JPY on July 30-31 and August 3. The US also stepped in, with intervention estimated at $1bn. The FX reaction was swift."

"USD/JPY plunged from an intra-day high of 163.74 on July 30 to a low of 155.23 on August 3 and has largely failed to sustain a break above 160.00 since."

"Bottom line: USD strength keeps USD/JPY under upward pressure, but the threat of intervention tilts the risk-return against further JPY selling and should limit overshoots above 160.00."

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