USD/JPY: Pair Approaches 160 Amid Verbal Intervention – MUFG

USD/JPY’s recovery towards 160.00 is reversing September’s BoJ-driven correction, with a firmer US Dollar and hawkish repricing of Fed expectations behind the move, according to MUFG’s Lee Hardman. As Japanese officials intensify verbal intervention and signal that they are prepared to act again, MUFG continues to expect the BoJ to maintain a faster, quarterly pace of rate hikes in December, notwithstanding dovish remarks from board member Asada.

Is Japan ready to intervene again?

"The hawkish repricing of Fed rate hike expectations and stronger US dollar have resulted in USD/JPY rising back to within touching distance of the 160.00-level for the first time since the start of September."

"With USD/JPY moving back towards pre-joint intervention levels from late July/early August, it has prompted Japanese officials to step up verbal intervention overnight to support the yen. Japan’s top currency official Atsushi Mimura stated overnight that “I have a strong impression that the currency moves over the past few days have been too fast”. He added that “it’s too early to forget what happened this summer”."

"It sends a strong signal that Japan is prepared to intervene again to support the yen which should help to limit further upside for USD/JPY beyond 160.00."

"However, it will be even more difficult to reverse the upward trend for USD/JPY right now with the USD strengthening broadly on the back of expectations for faster Fed rate hikes. If the rising risk of further intervention helps to stabilize USD/JPY while the US dollar continues to strengthen more broadly it could see non-USD yen crosses moving lower."

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