ING on USD/JPY: Back to the 1980s
In breaking above the 2024 highs near 162, USD/JPY has returned to levels not seen since the 1980s. Traders continue to second-guess when and where the Bank of Japan will intervene again, but the outlook for successful intervention remains poor Intervention incoming Having sold just over $70bn in late April/early May at levels just above 160, the BoJ is widely expected to intervene again over the coming days and weeks. Japanese officials have made it clear that the weak yen poses a threat to import costs and Japan s cost of living crisis, which has been a key topic for the electorate. Currently, those cost of living concerns are being addressed through government subsidies, which themselves bring some concern for the bond market. In recent years, the BoJ has typically intervened in clustered bursts of two to three days when it believes intervention is most likely to be effective. These episodes have tended to coincide with holiday-thinned market conditions, allowing the BoJ to deliver a bigger bang for its intervention buck. Also important is market positioning. What we note today is that the speculative position is quite short yen, but not as extreme as it was during the.
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In breaking above the 2024 highs near 162, USD/JPY has returned to levels not seen since the 1980s.
Traders continue to second-guess when and where the Bank of Japan will intervene again, but the outlook for successful intervention remains poor Intervention incoming Having sold just over $70bn in late April/early May at levels just above 160, the BoJ is widely expected to intervene again over the coming days and weeks.
Japanese officials have made it clear that the weak yen poses a threat to import costs and Japan s cost of living crisis, which has been a key topic for the electorate.
Currently, those cost of living concerns are being addressed through government subsidies, which themselves bring some concern for the bond market.
In recent years, the BoJ has typically intervened in clustered bursts of two to three days when it believes intervention is most likely to be effective.
These episodes have tended to coincide with holiday-thinned market conditions, allowing the BoJ to deliver a bigger bang for its intervention buck.
Also important is market positioning.
What we note today is that the speculative position is quite short yen, but not as extreme as it was during the successful intervention campaign of summer 2024.
In terms of immediate timing, we suspect the BoJ might hold off ahead of possible dollar-positive event risks such as remarks tomorrow from Federal Reserve Chair Kevin Warsh and Thursday s release of the June US jobs report.
That makes Friday s US July 4th holiday a possible window for intervention.
A no-show from the BoJ this week would strengthen the case for holding off until 16 17 July, just ahead of Japan s next public holiday, Marine Day on 20 July.
That was the 2024 playbook.
If the BoJ does wait until later in July and US data and Fedspeak remain hawkish, USD/JPY could be trading around 164 165 by then.
For reference, the FX options market now attaches a 37% probability to USD/JPY touching 165 by the end of July.
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