Thin liquidity defined the Asia-Pacific session on Monday with Japan and mainland China both out for public holidays. USD/JPY saw some early volatility before the pair spent the remainder of the session drifting modestly higher.
USD/JPY consolidates near 157.00 as Iran tensions counter suspected JPY intervention
Interest rate expectations are shifting as oil-driven inflation and yen intervention risk reshape USDJPY, EURJPY, and GBPJPY, while the Fed, ECB, BOE, and BOJ face new policy pressure.
The Dollar to Yen (USD/JPY) exchange rate traded at 157.07, holding below recent highs after failing to sustain gains above the 160 level amid intervention risks and shifting policy expectations. Rabobank notes that the Japanese Yen remains one of the weakest G10 performers this year, with the currency still widely used as a funding.
We've entered a new regime where the threat of intervention is dominating USD/JPY, not movements in energy prices, with extended holidays in Japan, thin liquidity, and a heavy slate of US data all colliding to leave the potential for significant volatility. With nonfarm payrolls data out Friday, the near-term effectiveness of suspected intervention by the Bank of Japan (BOJ) will be put to the test.
Well, they finally did it. The Bank of Japan intervened in markets on Thursday morning and drove a sell-off of more than 400 pips in the USD/JPY pairv.
The American currency is losing some ground ahead of the weekend.
USDJPY managed to hit a fast drop after the Bank of Japan threatened to intervene in the market to back up the currency. As we see from the chart, prices managed to test the trend support around 155.60 which could lead to a trading zone towards the resistance at 157.50-70.
We saw the USD/JPY dip again this morning, but it has since bounced back after again finding good support at just below the 156.00 level. Alongside what looked like fairly sizeable dollar-selling from the Bank of Japan yesterday, you also had a decent push higher in equities, which only added to the softer tone in the dollar more broadly, while the dip in oil prices yesterday also clearly helped.
USD/JPY dives to 155.50 lows on another alleged intervention
The USD/JPY pair dropped 450 pips after suspected Bank of Japan intervention near the key 156 level, with analysts leaning bullish on the dollar longer-term but advising patience before entering a position.
USD/JPY Price Forecast: Holds above 157.00; bulls seem hesitant amid intervention fears