The price of USDJPY soared on Friday, and markets are speculating on the action from the BOJ.
USDJPY – Daily Chart
The USDJPY price soared on Friday from around 155 to 158.23. Without BOJ intervention, there is no resistance above 158.23.
The Japanese yen fell Friday to its weakest level against the US dollar since 1990.
“Moves of this size and speed in currencies is not normal so I expect some intervention or coordination fairly soon if it continues into the next few weeks,” Quinn Thompson, founder of Lekker Capital, told CoinDesk.
The yen’s devaluation could now mean that the Bank of Japan is forced to take action to stabilise the market. A failure to do so on Friday in the Asian session led to the recent losses. That could start with comments rather than monetary efforts. A threat to intervene or talk of a possible interest rate increase could shock the market into unwinding their FX bets.
The latest currency wobbles came as BOJ Finance Minister Shunichi Suzuki repeated his recent warnings against speculative moves against the yen, keeping traders on edge.
“The weak yen has both positive and negative impacts on the economy,” Suzuki told a press conference, adding that he is “more concerned about the negative effects right now.”
Suzuki said he would not comment on specific policy measures. However, authorities closely watched currency moves and were ready to take action.
The weaker yen boosts exports, but it has become a headache for Japanese policymakers as it inflates household living costs. The finance minister added that measures to slow surging prices are key policy priorities for the government.
That statement means an interest rate move to cool inflation and strengthen the yen is possible.
“The currency takeaway is certainly disappointing from the lack of guidance from the bank,” said Rodrigo Catril at National Australia Bank.
“To me, the currency market is telling us it believes that the BOJ policy is too loose and hence why the currency is so weak.”
The yen will continue to dominate the market in the coming weeks and could experience significant price swings.