Mind the Intervention by Japanese Officials as USD/JPY Approaches Last Year’s High
USD/JPY has been bought on every dip as buyers remain in total control. The Bank of Japan failed to meet market expectations again yesterday, which sent this pair toward 152 after bouncing from a 200 pip dip the previous day on false BOJ hopes.
Since bottoming below 130 in January this year, which came after the Bank of Japan intervention and a retreat in the USD at the close of last year, USD/JPY has been rebounding upward throughout 2023. Since then, this pair has risen more over 20 cents, with buyers maintaining complete control even as the USD has retraced lower.
The Bank of Japan meeting last month didn’t generate much, failing to fulfill market expectations following comments from Bank of Japan Governor Kazuo Ueda, who said that the central bank may abandon its negative interest rate approach, boosting the pair’s upswing even more. They made no mention of the action that lowered the Yen and brought this pair higher.
A similar scenario took place before yesterday’s meeting, with markets building up expectations of a policy tweak by the BOJ. There was a story from Nikkei which read, “BOJ to tweak policy again to allow 10-year yields to exceed 1%,” yet the content merely says “consider it.” There is no word on what, if any, ceiling may replace the policy, but traders were betting on 1.25% or 1.50%.
The Bank of Japan did not adjust its yield curve control (YCC) policy, but it did change its rhetoric about the target range for the benchmark 10-year Treasury yield rate. The Bank of Japan decided to preserve the yield objective but set a reference cap of 1%. The move follows a bond market sell-off last month, which sent the 10-year JGB yield to a 10-year high. Despite an increase in Japanese inflation, the Bank of Japan maintained its ultra-low interest rates. This continues to put pressure on the JPY, thus supporting USD/JPY .
The previous time USD/JPY surged to this level was about a year ago and it was knocked down by around 700 pips in just a day. The Ministry of Finance of Japan typically advises against such moves and that’s precisely what we witnessed yesterday with USD/JPY up 260 pips to 151.70s. So, traders should be careful with longs now, since the intervention might come at any time.
USD/JPY Live Chart
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