Not even the richest governments in the world have the power to fight currency market fundamentals.
The Japanese ministry of finance may be put to the test again but a round of US dollar strength following a solid September non-farm payrolls report. The US added 263K jobs compared to 250K expected and the unemployment rate fell to 3.5% from 3.7%. The data solidifies that we will go at least another month before at hint at a Fed pivot.
But what about a Bank of Japan pivot?
The MOF last month sprang into action and intervened in USD/JPY after the pair broke 145.00 for the first time in decades and that prompted a quick drop to 140.25. Since then, the pair has rebounded and continues to press up against 145.00, though usually below.
It's trading at 145.13 after the data, up from 144.90 beforehand. The scope of that move is smaller than other USD moves (including 70 pips lower in cable) and that suggests the market is being restrained.
But how much longer can strong fundamentals be helpd back?
The hammer would be the Bank of Japan lifting yield curve control (or even rates). UBS was out with a note yesterday forecasting that would lead to a fall to 130.00.
