USD/JPY: Intervention supports gradual downside view – MUFG

FXStreet Insights Team FXStreet

MUFG’s Michael Wan highlights that Japanese authorities likely intervened in FX markets as USD/JPY dropped from near 160 to below 157, with estimated operations of JPY5-6 trillion. He notes these efforts mirror past interventions in 2022 and 2024. MUFG’s base case is for two Bank of Japan (BoJ) rate hikes and a gradual USD/JPY move toward 152.

Authorities lean on intervention and BoJ hikes

"In particular, USD/JPY fell sharply from a peak of closer to 160 to slightly below 157 at the time of writing, with likely FX intervention on Thursday evening Asia time to help to push down USD/JPY."

"Estimates by market participants based on current account deposit data released by the Bank of Japan and relative to changes in money market positions showed that intervention could have been around JPY5-6 trillion, or around US$32-38bn."

"If these preliminary estimates are correct, the magnitude would be quite similar to FX intervention during April 2024 and Oct 2022."

"Whether these efforts result in a sustainable return in USD/JPY lower would ultimately have to depend also on the fundamentals, and in particular whether the Fed turns more dovish and importantly whether the Bank of Japan deliver on rate hikes moving forward."

"Our base case remains for two BoJ rate hikes in June and December this year, and this will be a crucial assumption together with de-escalation in the Strait of Hormuz in forecasting a gradual move lower in USD/JPY towards the 152 levels."

(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 offered below 0.7000

AUD/USD extends its decline for a second consecutive session, retreating toward the 0.6960 region, or multi-day lows, ahead of the opening bell in Asia. The pair’s decline comes as investors keep digesting the RBA’s latest monetary policy decision and gear up for US Midterm election results.

USD/JPY fails near 159.00 amid weak USD, intervention risks

USD/JPY edges lower during Tuesday’s Asian session, reversing part of the previous day's gains to 158.00 as the US Dollar remains depressed amid hopes for Iran diplomacy and ahead of US midterm elections. Meanwhile, intervention risks support the Japanese Yen, though the uncertainty over the timing of the next BoJ rate hike caps gains. This keeps the pair confined within a familiar range and warrants caution before placing directional bets.

Gold struggles near $3,900 as traders assess Middle East developments,US election risks

Gold (XAU/USD) loses momentum on Tuesday as Oil prices rebound after the Wall Street Journal (WSJ) reported a US strike on Iran’s Qeshm Island. At the time of writing, XAU/USD trades around $3,909, down 0.93% on the day.

BNB Price Forecast: BNB rebounds above $700 as Binance records net inflows after hack

BNB (BNB) springs up above $700 on Tuesday, as bulls push to regain momentum following last week’s sell-off. The decline from highs above $760 on Thursday to lows of $680 was largely driven by investor reaction to the security breach on Binance, the largest crypto exchange. The hack impacted approximately $6.3 billion, the largest in crypto industry history.

US Dollar Index edges up within range with midterm elections front and centre

The US Dollar Index is picking up from session lows but remains within previous ranges, below 102.00. The Greenback is drawing support from hostilities in Iran and higher Oil prices, but US political uncertainty is capping gains.

The 2% inflation target came from a throwaway remark. It now moves trillions

The Federal Reserve's 2% inflation goal grew out of an off-the-cuff remark by a New Zealand politician in 1988. Bond investors still price long-term US debt as if 2% holds, so a change in how the Fed measures inflation would move markets.