USD/JPY: Verbal intervention by Japanese authorities will help curb short-term rises – MUFG

USD/JPY has returned to near two-year highs, just below the 152.00 level. The economists of MUFG Bank They analyze the pair's prospects.

The renewed weakness of the Yen increases the concern of Japanese policymakers

Japanese authorities are under pressure to again support the Yen after market participants lowered Fed rate cut expectations earlier in the year in response to stronger US inflation data. Last week's confirmation from the Fed that they still plan to deliver three rate cuts this year was not enough on its own to prevent the US dollar from strengthening further last week.

However, We expect verbal intervention from Japanese officials to help curb the rise of USD/JPY in the short term.. Masato Kanda, Japan's top currency official, warned that “the current weakening of the Yen is not in line with fundamentals and is clearly driven by speculation. We will take appropriate measures against excessive fluctuations, without ruling out any options.” He also added that “we are always prepared” when asked about the possibility of direct intervention. He noted that the “huge 4% swing in just two weeks in USD/JPY” does not reflect fundamentals he considers “unusual.”