USD/JPY: Intervention battles rising Oil – DBS

DBS Group Research’s Chang Wei Liang notes that Japan has stepped up intervention to support the Japanese Yen after the US–Iran clash in the Strait of Hormuz lifted Brent towards USD115. Despite two consecutive operations that briefly drove USD/JPY to the mid‑155s, the pair has rebounded near 157, and further intervention is possible until a more durable JPY recovery emerges.

Authorities battle weak Yen and Oil shock

"Japan is intervening in markets to support the JPY, with a second consecutive intervention yesterday that pushes USD/JPY down to mid-155 levels. The abrupt fall in USD/JPY from above 160 has come after Vice Minister Mimura issued an explicit “final warning” last Thursday."

"Officials may have judged it advantageous for interventions this week amid Japanese holidays and lower liquidity, but an unexpected jump in oil prices has rendered intervention effects to be less impactful."

"USD/JPY has quickly rebounded back to its pre-intervention level of 157, and officials could continue intervention again today until there is a durable JPY recovery to protect credibility."

"A Japanese Finance Ministry official has reportedly cited an IMF rule that three days of intervention count as a single operation and is still consistent with a free-floating exchange rate regime."

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