Japan’s Ministry of Finance (MoF) finally snapped today and ordered the Bank of Japan (BoJ) to intervene in support of the yen as the USD/JPY neared 146. Nonetheless, economists at Scotiabank believe that the JPY is unlikely to strengthen.
BoJ to the rescue
“Having initiated the intervention process, we think the BoJ will have to keep at it; the central bank has very deep pockets and can vary its tactics (asking the ECB, BoE or even the Fed to act as its agent out of Tokyo hours, for example). There is, in effect, a line in the sand for USD/JPY now around the 146 point which markets will likely challenge to test the BoJ’s resolve and which we think the BoJ will have to be prepared to spend billions (USD) to hold. In all likelihood, however, the BoJ will be alone in trying the beat back the USD.”
“Absent a major change in underlying fundamentals or (however unlikely) concerted action against the USD, the chances of a sustained rebound in the JPY are limited, however. The key issue here, of course, is the diverging monetary policy settings between the US and Japan which have prompted a sharp slide in the JPY since the Fed first started getting serious about raising interest rates in the spring.”
“Peak Fed pricing and a rebound in global stocks will work against the USD eventually but US 10-year yield rising to 3.63% today suggests the BoJ will have its work cut out in the coming days if the Japanese monetary authorities want to maintain credibility.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.