It appears that Japan’s Ministry of Finance has adjusted its FX intervention strategy. USD/JPY fell around 2% following the release of the US Consumer Price Index (CPI) yesterday, considerably more than any other USD cross, and the surge in JPY futures volumes seemed consistent with FX intervention, notes Francesco Pesole, FX analyst at ING.
Unexpected intervention in Japan
“Japan’s top foreign exchange official Masato Kanda refused to admit that the Finance Ministry had intervened in the market, but there have since been at least two reports citing inside sources suggesting intervention. If true, data at the end of the month will confirm this speculation. For now, given the rather unusual decline in USD/JPY, we will assume that the Finance Ministry intervened yesterday.”
“That would mark a shift in Japan’s foreign exchange intervention strategy. Recall that in late April, the Finance Ministry began intervening ahead of a Federal Reserve (Fed) meeting, which has proven largely fruitless beyond the very short term. Now it appears that the Finance Ministry waited to take advantage of a negative market event for the USD and thus boost the yen through intervention.”
“The US CPI release was good news for the Yen (JPY) regardless of the unconfirmed intervention in the FX market, as there is a way ahead for USD/JPY to trade lower due to a narrowing gap in the USD:JPY rate. At the same time, the FX market intervention reduces the chances of the Bank of Japan raising rates in July to support the JPY, and it may still take time before USD/JPY can enter a sustainable downtrend.”
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
