In case you missed it, from earlier: BofA cuts USD/JPY year-end forecast to 149 after intervention
This provides to their earlier fast take that the joint motion by the US and Japan has eliminated the “final constraint” on intervention.
Given the state of affairs, they’ve revised down their USD/JPY forecast for Q3 2026 to 153 (beforehand 154) and year-end goal to 149 (beforehand 152). BofA notes that:
“The Japanese and US authorities performed a coordinated FX intervention on 31 July. Each governments have acknowledged that the intervention was carried out. Whereas the quantity of yen shopping for by the US could also be restricted, the signaling impact of this uncommon, coordinated intervention is critical.”
The agency goes on so as to add that the most recent intervention effort has now raised the chances of Japan having the ability to higher defend the yen forex and will additionally allude to faster BOJ charge hikes down the highway. They define some key factors on what affect the joint intervention could have on the general market panorama:
- What’s the short-term goal of the intervention? To drive USD/JPY beneath 155.
- What’s the long-term purpose then? To revive credibility and stabilise the Japanese yen forex.
- What’s the significance of the coordinated motion? It successfully removes the restrict/main constraint on intervention.
- What does this indicate for BOJ coverage setting? It probably might sign sooner charge hikes; September in watch.
- What’s the implication for the JPY? Optimistic, as outlined by the upward revision to the forecasts.
- What’s the implication for the JGB market? Desire to remain lengthy by way of 30-year asset swaps than commerce the curve.
- How will additional MOF intervention be funded? Probably involving the sale of US Treasuries.
- What’s the implication for the USD and EUR charges market? Restricted.