After Intervention, USD/JPY Begins to Recover
Japan is suspected of intervening repeatedly, causing USD/JPY to fall to a three-week low at 151.85 last Friday. However, the currency pair has rebounded this week, reaching a three-day high at 154.65 in Asian trading yesterday.
Japanese officials have consistently refused to answer whether their country has undertaken selling actions of the dollar to boost the yen's exchange rate. However, data from the Bank of Japan (BoJ) reveals indications of several currency interventions totaling around 9 trillion yen. Masato Kanda, a Japanese Currency Diplomat, warned again this morning that the government "will continue to take the same firm approach" towards the volatile movement of the yen. Additionally, he acknowledged that the government would not intervene in orderly market situations. Kanda's statement failed to intimidate yen sellers. Reuters reported that some analysts instead interpreted it as a signal that the risk of Japanese intervention has diminished.
The yen remains one of the favored currencies for "selling" in carry trades, given the substantial interest rate differential between Japan and the United States. The Federal Reserve has continued to maintain its interest rate at 5.25%-5.50% in the recent FOMC meeting, while the Bank of Japan persistently keeps its interest rate at nearly zero. Analysts at DBS state that the yen remains the most undervalued among G10 currencies despite its recent strengthening due to Japanese intervention last week. Meanwhile, the US dollar remains significantly overvalued. Currently, the yen also shows indications of bearishness against various other major currencies. EUR/JPY briefly touched a low of 164.00 last week but is now hovering around 165.90. GBP/JPY dropped to 191.35 at one point but recorded its highest level at 194.10 last morning.
Japanese officials have consistently refused to answer whether their country has undertaken selling actions of the dollar to boost the yen's exchange rate. However, data from the Bank of Japan (BoJ) reveals indications of several currency interventions totaling around 9 trillion yen. Masato Kanda, a Japanese Currency Diplomat, warned again this morning that the government "will continue to take the same firm approach" towards the volatile movement of the yen. Additionally, he acknowledged that the government would not intervene in orderly market situations. Kanda's statement failed to intimidate yen sellers. Reuters reported that some analysts instead interpreted it as a signal that the risk of Japanese intervention has diminished.
The yen remains one of the favored currencies for "selling" in carry trades, given the substantial interest rate differential between Japan and the United States. The Federal Reserve has continued to maintain its interest rate at 5.25%-5.50% in the recent FOMC meeting, while the Bank of Japan persistently keeps its interest rate at nearly zero. Analysts at DBS state that the yen remains the most undervalued among G10 currencies despite its recent strengthening due to Japanese intervention last week. Meanwhile, the US dollar remains significantly overvalued. Currently, the yen also shows indications of bearishness against various other major currencies. EUR/JPY briefly touched a low of 164.00 last week but is now hovering around 165.90. GBP/JPY dropped to 191.35 at one point but recorded its highest level at 194.10 last morning.
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