USD/JPY brushes past 150, intervention is still talk of the town

The US dollar climbed to a nearly three-week high against the Japanese yen, surpassing the 150-mark, as Treasury yields rose, and riskier currencies lost favour. The yen briefly surged after hitting a fresh one-year low of 150.78 per dollar, sparking concerns about possible intervention by Japanese authorities.

The Japanese yen’s slide to this new low, just shy of the 32-year low of 151.94 recorded in October last year, has revived worries in the market.

Analysts observed a sharp but brief strengthening of the yen to 149.865 before settling around 150.50. However, experts like Niels Christensen, Chief Analyst at Nordea, argued that this minor movement suggested it wasn’t a deliberate intervention. “The move was less than one big figure. That tells me it wasn’t intervention,” Christensen noted, explaining that a significant intervention would have led to more substantial fluctuations.

Japanese Finance Minister Shunichi Suzuki, while not directly commenting on the potential for intervention, warned traders against further selling of the yen. “I’m watching market moves with a sense of urgency, as before,” Suzuki stated, emphasising the authorities’ vigilance.

The Bank of Japan faces increasing pressure amid rising global interest rates. Sources revealed discussions about a possible hike to the existing yield cap set three months ago. Japan’s persistently low yields have made its currency vulnerable to short-selling and funding trades. The substantial interest rate gap between Japan and the United States, a result of the Federal Reserve’s aggressive rate hikes since March 2022, has contributed to the yen’s ongoing weakness.

Meanwhile, benchmark U.S. 10-year Treasury yields edged higher, inching towards a 16-year peak above 5.0%, briefly breached earlier this week. On Thursday, the 10-year yield stood at 4.9616%, adding to the pressure on the yen.