MUFG Research discusses the scope of the JPY intervention and argues that elevated fears of intervention may well fade quickly. MUFG maintains a long USD/JPY position targeting a move towards 146.
“The yen clearly outperformed in the currency markets yesterday, with those gains only partially reversed so far today after Finance Minister Shunichi Suzuki’s comments yesterday and reports that the BoJ was checking the rates were having the desired impact… The steps were really the last ditch efforts to halt the JPY’s depreciation before the actual intervention.So in that sense the market reaction is understandable.But it is also highly likely that there is still a deep reluctance on the part of the authorities to intervene“, notes the MUFG.
“However, we shouldn’t just dismiss what happened yesterday either. If there is intervention in the days or weeks to come, it will be carried out under cover
of what is allowed according to the parameters of the G20. This means that the speed of a movement is important. In June, when the MoF/BoJ/FSA issued a joint statement expressing concern over the depreciation of the JPY (June 10), USD/JPY was up 5.5% in the previous 10-day period . Over the 13 days to yesterday, USD/JPY is up 6.0%. If we consolidate and then move slowly, there is a good chance that the Ministry of Finance will accept the movement and refrain from intervening“, adds MUFG
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