USD/JPY: Verbal warnings cap upside near 160.00 – MUFG

MUFG’s Senior Currency Analyst Lee Hardman highlights that USD/JPY is stalling just below 160.00 as Japan’s Finance Minister Katayama escalates verbal intervention, stressing readiness to respond at any time. Authorities argue recent Yen moves are misaligned with fundamentals, though the roughly 2% Yen decline since the Middle East conflict broadly matches US Dollar gains versus other G10 currencies.

Japanese officials raise intervention threat

"USD/JPY has continued to trade just below the 160.00 overnight hitting a high of 159.49. The pair has temporarily stalled at just below 160.00 reflecting renewed concerns over the risk of intervention to support the yen, and a broader loss of upward momentum for the US dollar yesterday. The dollar index dropped back below 100.00."

"Finance Minister Katayama has stepped up verbal intervention at the start of this week. She stated overnight that “there has been significant volatility across financial markets overall” while suggesting that the moves in the yen have not been aligned with fundamentals for a while, adding that the deviation appears particularly significant at present."

"She then warned that “considering the impact exchange rates have on people’s daily lives, we are fully prepared to respond at any time”. It follows on from her comments yesterday that they are ready to take “bold action” if needed."

"The comments in recent days have cast doubt on the view that was building among market participants that Japanese policymakers may be more tolerant to allow the yen to weaken in the near-term in response to the negative energy price shock."

"The yen has weakened by around 2% against the US dollar since the Middle East conflict began. The scale of the sell-off is broadly in line with US dollar strength against other G10 currencies highlighting that the recent yen sell-off is not an outlier."

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