USD/JPY: No Japanese Intervention Will Make Dollar Bulls Shy at This Point
Once bitten, twice shy? Not with dollar bulls, and not when the prey is the yen.
A day after an apparent intervention by the Japanese government, USD/JPY was bobbing at between 149.32 and 149.09 — having survived the year-low and line in the sand of 150 drawn by Tokyo.
Yet, few have illusions that those stalking the yen have been dissuaded by the events of Tuesday.
Well before the fightback many think was engineered by Japan’s finance ministry — as of Wednesday, the nation’s top currency official Masato Kanda declined to say if the government had indeed stepped into the ring against the greenback — the bigger target of USD/JPY bulls was 155.
That seemed to be still in the sights of the dollar’s proponents, especially with the US currency laden with the Federal Reserve’s higher-for-longer rates ammo versus the yen, weighed by the Bank of Japan’s lower-for-the-foreseeable-future rates regime (despite BoJ pledges for change, which few believe).
Said David Scutt, forex and rates specialist and analyst at City Index:
“USD/JPY has morphed into a play on yield differentials between the United States and Japan rather than the risk appetite barometer it once was, meaning forecasts involving the pair are really a reflection of what’s likely to happen with interest rates.”
“As such, whether the Federal Reserve continues running monetary policy at restrictive levels, or if the BOJ manages to unwind its array of easing measures, will likely play a significant role in determining how USD/JPY closes out 2023.”
From a range of plausible scenarios examined by Investing.com, including that of Japanese currency officials playing bogeymen again to defend the yen, none seem to offer a long-term fix for the ills plaguing the JPY.
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