Another whipsaw day for the yen

The Japanese yen is sharply lower today, as USD/JPY has climbed 1.2% and is trading at 149.41 in Europe.

The yen continues to exhibit strong swings for a second straight session. The yen started the week with sharp gains and jumped to 145.28, but the dollar has recovered and pushed the yen back above 149. This is a repeat of the whipshaw we saw on Friday, when the yen traded in a range of almost 600 points.

MOF apparently intervenes to boost yen

The wild price action is most likely a result of intervention by Japan’s Ministry of Finance (MOF), although Japanese authorities are staying mum. Prime Minister Kishida said today that the government would not tolerate excessive currency moves based on speculators, but this rhetoric is nothing new.  The yen hit a new 32-year high of 151.95 on Friday, and the MoF may have decided to take off the gloves and has intervened for a second straight day.

Will the stealth intervention succeed in propping up the yen? The move did the job on Friday, with USD/JPY falling 1.7%, but the dollar has recovered most of those losses on Monday. The harsh reality is that the widening rate differential between Japan and the US will make unilateral intervention unlikely to succeed. The Fed continues to ramp up interest rates while the Bank of Japan zealously has capped rates on JGBs. This included an emergency bond-buying package last week to keep yields on 10-year bonds below 0.25%. The yen has plunged a staggering 22% against the dollar in 2022, and speculators are betting that the yen’s slide will continue.

The BoJ meets for a two-day meeting on Thursday and Friday. If the Bank maintains its dovish policy stance and refuses to provide the yen with a lifeline, the currency is likely to fall even further.

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USD/JPY Technical

• USD/JPY faces resistance at 147.50 and 148.59
• There is support at 145.23 and 143.14

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