Analysts sceptical of Japanese action as USD/JPY approaches 152

Yen bears stay on guard as analysts doubt Japanese intervention at current levels.

Analysts sceptical of Japanese action as USD/JPY approaches 152

The yen is teetering near 152 per U.S. dollar (USD/JPY), a level that triggered intervention by Japanese authorities last year, but analysts argue the circumstances are different this time around.

Despite the Japanese currency hovering a whisker away from its weakest since mid-1990, HSBC's Paul Mackel notes the dollar is not in a "bubble-like state" as in late 2022, complicating potential intervention efforts.

While Japan's vice finance minister Masato Kanda warned against yen speculation, Bank of America highlights the Ministry of Finance refrained from action in October 2023 and February 2024 as "market conditions changed."

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The trade-weighted dollar index stands at 126.70, weaker than its 133.32 peak in September 2022 when USD/JPY almost reached 152 from 115 in January before intervention. One-month volatility is also lower at 7 versus 12 back then.

ING's Min Joo Kang cites local accounts suggesting the BOJ may not intervene until USD/JPY hits 155, while BofA sees the level as a "moving target," recommending the pair reach 152-155 or volatility exceed 10 for intervention risk to rise.

In contrast to official rhetoric, fundamentals support USD/JPY's climb amid the widest policy divergence among major economies, with U.S. rates at 5.5% versus Japan's ultra-low settings.

My play continues to be to sell into USD/JPY strength, as Fed rate cut expectations and the BOJ's divergent policy outlook diminish long-term dollar support against the yen, though the pair could extend gains towards 155 in the near term.

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