After the yen fell to a 34-year low, there are growing concerns that Japanese authorities will intervene directly to support the yen.
Currently, most traders believe that USD/JPY may trigger intervention at the 152 level. The pair was already approaching this level earlier on Wednesday. Strategists said this was a new low, paving the way for further declines in the yen.
Japanese authorities earlier pledged to take appropriate measures to deal with excessive volatility in foreign exchange markets, saying there was speculative action behind recent yen moves. While the verbal warnings were not the more aggressive response some had hoped for, they also showed officials were becoming increasingly cautious.
Here's what strategists and investors have to say about the timing of Japanese authorities' intervention in currency markets.
Nick Rees, foreign exchange strategist at Monex Europe, pointed out that "Japanese officials' comments this morning (Wednesday) appear to be another attempt to defend the key psychological level of 152, and Fed Governor Waller's speech later today may allow the Fed to The pass is urgent.
He explained that it's worth noting that Waller has been the best barometer of FOMC core policy over the past six months, so if he strikes a more cautious tone than Powell, it would confirm the market's worst fears, which is that the Fed will Maintaining highs for a longer period of time could lead to USD/JPY breaking through 152 tonight and then towards 155. "
In light of this, Rees believes that Japan's emergency tripartite meeting and subsequent comments are a clear warning to the market to prevent investors from pushing the yen higher, even if Waller does tend to be hawkish.
Nonetheless, Rees still believes that USD/JPY will only be able to avoid breaking through the resistance level of 152 under the ultimate support of fundamentals, and if the Fed ultimately intends to maintain high interest rates for a longer period of time, then 152 points will be broken.
Peter Kinsella, global head of FX strategy at Union Bancaire Privee, said, "The rise of USD/JPY to 152 is clearly unsettling to some Japanese officials. It is still a long time before the Fed's summer rate cut, which means that the Ministry of Finance is likely to Act proactively and I expect interventions to be implemented sooner rather than later.”
Roberto Cobo Garcia, head of G10 FX strategy at Banco Bilbao Vizcaya Argentaria, expects Japan's Ministry of Finance to consider intervention if USD/JPY breaks above 152, although this did not trigger an intervention when the pair approached 152 in early November. “Especially if this coincides with increased volatility, or is interpreted as speculative behavior by the authorities, then they are more likely to take action, as they commented at the beginning of the week.”
He also pointed out that the Bank of Japan raised interest rates last week for the first time since 2007 because they were worried about inflation, and that this will be one of the driving forces when the weak yen threatens price stability.
Win Thin, head of global market strategy at Brown Brothers Harriman, noted that "Wednesday's emergency meeting was more than just a verbal warning and fell far short of possible actual action. Therefore, we expect the market to continue to test their ability to defend the yen." determination."
Guy Miller, chief market strategist at Zurich Insurance, believes that "from a technical perspective, around 152 does seem to be the bottom line. This suggests that this is the level at which the Japanese authorities start to feel uneasy about the yen." He said, "I would be prepared to buy JPY. But I'm patiently waiting for a turn to occur. We need to see USD/JPY fall back to around 148, which means a break of some moving averages. Once we see a turn, I'll feel more comfortable buying JPY. "
Brad Bechtel, Jefferies' global head of foreign exchange, said, "I don't think there is any need to worry about the Japanese authorities intervening in the currency market because the yen has not fluctuated significantly. If the dollar against the yen breaks through 152 points in a short period of time and then rises to 155 points , then the authorities may take their chances, but if the pair is just bouncing up and down and slowly rising, then there’s nothing to worry about.”
Article forwarded from: Golden Ten Data
