ING’s Chris Turner describes USD/JPY’s rollercoaster, with a 3% drop on reported Japanese intervention followed by a near 2% rebound. He notes that coordinated Fed-Treasury involvement was key in January but now sees the story as having moved on. Turner expects more Japanese FX intervention, yet believes it can only slow, not reverse, the underlying USD/JPY bull trend without a clearer Fed shift.

Japanese action tempers but does not end the rally

"USD/JPY has been on a rollercoaster, falling 3% yesterday on Japanese intervention, only to bounce back near 2% overnight. The Nikkei reported that Japanese authorities did indeed intervene yesterday and that the Fed, as it did in January, also checked rates yesterday afternoon."

"Back in January, the Fed checking USD/JPY rates on behalf of the US Treasury was a big story which reflected the co-ordinated nature of intervention and the shared concern by the US and Japan over the weak yen."

"However, the story has moved on now, and we would need to see some own-account intervention from US authorities to give USD/JPY another leg lower."

"We could well see some more Japanese FX intervention today and early next week, since intervention typically comes in blocks of a few days."

"But until we get a clearer signal that the Fed is not going to hike in September and the broader dollar trend clearly turns lower, intervention can only slow rather than reverse the underlying USD/JPY bull trend."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)