Yen traders are preparing for a repeat of the September 2022 scene. At that time, after the Bank of Japan reaffirmed its loose monetary policy, Japan intervened in the market to support the weak yen.
Given that the current exchange rate of the yen is much weaker than it was then, and US interest rates are unlikely to fall in the short term, Bank of Japan Governor Kazuo Ueda alone did not make any hawkish remarks until Friday, which may be enough to push the yen to a turning point. According to an analysis of the remarks made by Japan's top foreign exchange official, Finance Officer Masato Kanda, the US dollar to 157.60 yen is a key level worth paying attention to in the Japanese yen exchange rate.
Although the yen continues to fall and broke through 155 yen per dollar on Wednesday for the first time in more than 30 years, there is currently no sign that the Ministry of Finance is buying yen. However, the situation may change rapidly, and a number of factors may trigger a sharp fall in the yen and spur the Tokyo authorities to act.
Traders will be on high alert and keep a close eye on the Bank of Japan's policy statement and forecast around noon on Friday, followed by Kazuo Ueda's press conference in the afternoon, and the release of data on inflation indicators favored by the Federal Reserve. In addition, next Monday and Friday, Japan will have public holidays, and light market trading poses the risk of easy volatility.
Shoki Omori, chief trading strategist at Mizuho Securities in Tokyo, said that looking back at 2022, the intervention did have an impact, putting pressure on those holding short yen positions until the dollar resumed an upward trend against the yen. “The spread is too large, and investors will continue to be motivated to go long on this pair.” he said.
Kanda Masato said last month that the 4% depreciation of the yen within two weeks did not reflect fundamentals and was unusual. According to compiled data, if the yen depreciates to around 157.60 yen, it will reach this threshold.
At 15:53 Tokyo time on Thursday, the decline was extended to 155.62 yen per dollar.
