USD/JPY Hourly Chart
Now it’s more like it. Comparing this to Friday’s incident, there’s definitely a lot more difference, even in the first 30 minutes so far. It certainly looks like Tokyo is making it known that it’s on the market. I mean, I really don’t see anything or anyone else that could move USD/JPY this way.
The question now is: will they really be able to maintain this trend if market pressure persists in the short and medium term?
The big problem for Japanese officials is that they don’t have the fundamental narrative on their side. At the end of last year, it was already a race against time for the BOJ, and this is even more true now that price developments are starting to ease. This means that market participants are becoming increasingly skeptical about further rate hikes.
And no matter what they do with the currency, that perception won’t change until the inflation data changes.
The point to consider is that intervention is only doubly effective when it is associated with a change in the fundamental line of thinking. Something has to give.
And in the current case of the BOJ/MOF, they don’t really benefit from this support. All they can hope for is to buy time and deter speculators from going too far. But this will have a cost. And as much as they would hate it, they also can’t let the yen go into a dramatic free fall.
It’s about praying that something will eventually change. At best, in my opinion, something changes on the dollar side of the equation. Otherwise, it’s hard to fight the narrative in the long run. Talk about being placed between a rock and a hard place.
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