USDJPY has climbed back to previous levels of Bank of Japan intervention as officials note their concern.
USDJPY – Daily Chart
The price of the USDJPY is now back above the 157.59 level and that is above the previous selling in November.
“I’m deeply concerned about recent currency moves, including those driven by speculators,” Japanese Finance Minister Katsunobu Kato told reporters.
“The government will take appropriate action against excessive FX moves,” Kato added.
“In terms of whether there will actually be an intervention, the sense of tension is likely to increase as the yen approaches 160,” said Takeshi Ishida at Kansai Mirai Bank. “If they intervened in an environment of low liquidity the yen strengthening move could be bigger”.
The yen experienced a sharp move lower after the BOJ’ stood still on rates and Governor Ueda’s comments indicated the possibility of a later-than-expected rate hike in March or later. With Fed Chair Jerome Powell hinting at a hawkish stance on rates, traders expect a continued disconnect between US and Japanese rates.
“It may not work if they intervene right now, as there’s also dollar strength so there’s a risk it could have an unwanted impact,” said Tohru Sasaki at Fukuoka Financial. “They would likely hold off on intervention until it passes the 161 level since that’s around where they moved last time”.
Traders would be taking a risk if they went long the USD at the current level up to the 161 figure. There is also some concern around potential Trump tariffs in January. Any tariffs imposed on China could hurt the Asian economies.
Trump has an important Speaker vote on Friday, which could mean his vote cannot be certified as standard on January 6 if current Speaker Mike Johnson loses only two votes from Republicans.