If anyone is keeping count, the pair is coming into trading today on the back of ten consecutive days of gains. Some of which have been light but it reflects the sort of caution in the advance in fear of triggering another round of intervention by Japanese authorities.
Still, as the fundamental backdrop remains unchanged, traders are continuing to push the yen lower in the past two weeks. From last month:
“I would be remiss not to question the effectiveness of such a move (intervention). There is no doubt that this is a big moment in financial markets but it comes at a rather bad time honestly for Japan. Let’s take stock of the situation.
“For one, officials are only intervening after a 26% drop in the currency this year. Meanwhile, the BOJ remains at odds with the Fed in terms of monetary policy – in fact they couldn’t be at more opposite ends of the spectrum. That fact alone is enough to also make the yen less alluring as a safe haven currency as compared to the dollar amid widening rate differentials.
“And unless this is Japan signalling that they are ready to put a stop to the policy divergence, then officials are still fighting an uphill battle in terms of intervention. And that isn’t really ideal.”
In essence, nothing much has changed apart from the 145 level back then turning to be the 150 level at the moment. Will Japanese authorities try to hit back harder this time around?
And if they do, what happens when the markets lap it all up and push USD/JPY even higher again? Will they still try to fight the good fight or figure out a different approach? A BOJ pivot perhaps, anyone?
