Standard Chartered: Japanese yen intervention “very close”

Senior analyst at Standard Chartered says Japanese yen intervention “very, very close”

Steven Englander, head of Global G10 FX research and North America macro strategy at Standard Chartered Bank, on Thursday told CNBC that Japan is “very, very close” to intervening in the yen as the currency hovers at multi-decade lows.

Englander told CNBC’s “Squawk Box Asia” on Thursday:

“I think we’re actually very, very close to them [Japanese authorities] jumping in [...] they’ve already discussed the political consequences and nobody’s sitting there asking for a weaker yen”.

On Friday, the Japanese yen traded near 151.35 against the U.S. dollar, having dipped to its lowest level in 34 years at 151.97 in the Wednesday session, sparking speculation about a potential currency intervention by the Japanese authorities.

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Japan’s finance minister says government may “respond to disorderly FX moves”

Japan's finance minister, Shunichi Suzuki, hinted this week that measures to "respond to disorderly FX moves" were not off the table. In another comment, Suzuki also mentioned that the government would take “decisive action” on unwanted currency volatility — but declined to say whether that meant actual yen intervention.

Masato Kanda, the vice finance minister for international affairs, reportedly said on Wednesday that fluctuations in the yen were being watched closely and urgently.

Chief Cabinet Secretary Yoshimasa Hayashi said on Thursday that authorities would explore all options to counter extreme currency movements, according to Reuters, echoing sentiments from other government officials who stressed the urgency of monitoring FX dynamics.

Standard Chartered’s Englander suggested that a potential yen intervention would aim to buy time for Japanese authorities until the U.S. Federal Reserve adjusts interest rates or until the Bank of Japan hikes its rates further.

He noted that Japan's previous yen intervention in 2022 “went pretty well” — even though investors were initially skeptical as to the effectiveness of such a move.

While the Bank of Japan abandoned its negative interest rate regime and yield curve control policy in a historic decision last Tuesday, it did little to stop the Japanese yen’s slide.

In contrast, the U.S. Federal Reserve kept its benchmark rate steady last Wednesday and hinted at multiple interest rate cuts later in the year.

Japanese yen forecast: ING says Japan may pull trigger in 153-155 USD/JPY range

In the latest edition of ING’s FX Daily commentary, Chris Turner, the bank’s Global Head of Markets, issued a Japanese yen forecast saying that an intervention was likely around the 153 to 155 yen-per-dollar area:

“We suspect Japanese authorities would pull the trigger were USD/JPY to burst through the 152 area, intervening perhaps somewhere in the 153-155 range.

Recall that when Japan last sold FX in September/October 2022, it started off with about $15-20bn and, in total, sold around US$65bn of FX over the two months. What may be interesting this time around is if it leaves the intervention unsterilised – i.e., delivering a net drain of yen liquidity which can see some ripples in money markets. At least FX intervention from now on will be more consistent with the BoJ's new tightening bias for monetary policy.

With US interest rate volatility collapsing and much demand for the carry trade, it is, however, hard to see much of a market-led move lower in USD/JPY”.

At the time of writing on Friday, March 29, the USD to JPY pair hovered around the 151.33 area, with both Japanese and U.S. markets closed. The U.S. dollar index (DXY), a gauge of the greenback’s strength against six major counterparts, was last at 104.55, up 0.12% on the week.