Credit Agricole suggests that recent interventions by Japan's Ministry of Finance (MoF) and Bank of Japan (BoJ) have successfully created asymmetric risks around the USD/JPY exchange rate. Estimated expenditures nearing those of previous interventions in 2022 have effectively influenced market expectations and risk assessments.
Key Points:
Intervention Estimates: Preliminary data indicates that the BoJ may have spent approximately USD 55 billion on interventions to support the yen, with significant purchases occurring on specific days last week.
Comparison with Previous Interventions: This level of intervention is close to the USD 60 billion spent during the last major intervention effort in September and October 2022, which resulted in a notable depreciation of USD/JPY.
Market Impact: The actions by the MoF and BoJ have likely set a temporary ceiling on USD/JPY, deterring traders from pushing the pair significantly higher. This effect is complemented by the recent dovish signals from the Federal Reserve, which curb expectations of a rapidly strengthening USD.
Conclusion:
The concerted efforts by Japan's financial authorities appear to have tempered the bullish momentum in USD/JPY, establishing a cautious trading environment. Investors may be hesitant to challenge these levels soon, given the aggressive stance of the MoF and supportive rhetoric from the Fed.
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