Japanese yen - what's the target for intervention?
On Monday the Dollar Index hit its highest level since mid-November, driven by a jump in yields on US Treasury bonds. But the dollar has fallen quite sharply since then. However, it’s the Japanese yen that remains the main focus in FX. The USDJPY continues to consolidate near multi-decade highs, just below 152.00. We have heard several warnings from senior policymakers and the Bank of Japan that they stand ready to intervene to support the yen. Often, this kind of verbal threat is enough to convince traders to close out their yen shorts and reverse. But it looks as if traders are prepared to take on the Japanese authorities and call their bluff. There’s been plenty of speculation around how high the USDJPY has to go to trigger real hard money intervention, with 152.00 cited as a possibility. But there were some interesting comments made overnight by Hiroshi Watanabe, who, between 2004 and 2007, was known as Japan’s top currency wonk. Reuters reports that Mr Watanabe believes that there will be no intervention until the USDJPY gets up to 155.00. It will be interesting to see if FX traders decide to test this out.
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