Japan’s authorities may step in to curb Yen weakness after USD/JPY hits levels that triggered past interventions, DBS says.
USD/JPY has surged past 161, a threshold that previously prompted Japanese authorities to intervene in currency markets. The move aligns with broader USD strength post-FOMC but also reflects persistent speculative short positions in the Yen despite the Bank of Japan’s recent rate hike.
Japan’s tolerance for Yen depreciation appears near its limit, following a USD73 billion intervention in late April-May to support the currency. Falling oil prices, with Brent near USD76, may ease inflationary pressures and provide some relief for oil-sensitive Asian currencies.
Policymakers are expected to combine verbal warnings with potential market interventions to stem further Yen declines, according to analysts.