Japanese Yen: Intervention risk tempers downside against US Dollar – MUFG

MUFG’s Lee Hardman highlights that USD/JPY is trading near recent highs but remains capped below the July 2024 peak of 161.95 as intervention risks rise. A call between Japan’s Finance Minister and the US Treasury has fuelled speculation of potential joint action, while Bank of Japan (BoJ) minutes point to scope for faster rate hikes, yet Yen strength has not materialised.

BoJ signals hikes, Yen still weak

"The yen continued to trade close to recent lows against the US dollar with USD/JPY still holding below the July 2024 high of 161.95."

"After the call, Finance Minister Katayama told reporters that the two had agreed to take “bold steps” on currencies if needed, and said the two nations are increasingly “aligned” on foreign exchange rate policy."

"It has encouraged speculation that the US could even join Japan in undertaking joint intervention which would be more effective at pushing down USD/JPY."

"The release of the minutes overnight from the June policy meeting indicated support for further rate hikes. The BoJ has become less concerns over downside risks to growth while many members expressed awareness of upside risks to prices."

"The minutes suggested that one or two members may propose voting for another hike as soon as September or October."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)