Japan likely spent up to $35bn intervening to support the yen, but Barclays warns depreciation pressure will persist over the medium term as Iran war energy costs weigh.
Japan likely spent up to $35bn intervening to support the yen, but Barclays warns depreciation pressure will persist over the medium term as Iran war energy costs weigh. Summary: The dollar was on course for its largest weekly loss against the yen since February after Japan was reported to have intervened in foreign exchange markets, according to Reuters Bank of Japan data indicated authorities may have deployed up to 5.48 trillion yen, equivalent to approximately $35 billion, during the intervention, just below the $36.8 billion spent in July 2024, per Reuters Japan’s top currency diplomat Atsushi Mimura warned that speculative positions remained evident in the market following the operation, per Reuters Barclays analysts said the yen’s recovery from past interventions has typically reversed within two days, and flagged a risk of further interventions if dollar-yen rebounds sharply toward 160, per Barclays research note Barclays said persistent depreciation pressure on the yen is likely to continue over the medium to long term, citing fragile foreign exchange supply-demand conditions and inflation risk premia, per Barclays research note Barclays placed its fair value estimate for dollar-yen at 148 but said a degree of risk premium relative to that level is likely to persist, per Barclays research note The BOJ signalled it could begin raising rates as soon as June to address inflationary pressure from higher imported energy costs linked to the Iran war, according to Reuters; other analysts noted that Fed rate cut expectations have largely evaporated, limiting the scope for sustained yen strength Barclays also flagged concerns over Japan’s fiscal position, noting that increased defence spending and Prime Minister Takaichi’s reflationist BOJ board appointments had raised questions about policy discipline, per Barclays research note Japan moved to defend its currency last week, with Bank of Japan data pointing to an intervention of up to 5.48 trillion yen,…