Georgette Boele at ABN AMRO highlights persistent weakness in the Japanese Yen as investors test authorities’ tolerance for depreciation. Fiscal expansion and a dovish Bank of Japan stance weigh on the currency, while Japan’s energy-importer status adds pressure. With stretched long-Dollar/short-Yen positioning and explicit upside levels, she warns that any intervention-driven reversal in USD/JPY could be sharp and lasting.

Authorities’ tolerance for yen weakness

"Despite these factors, we noted in last week’s FX Weekly that the risk of intervention in the yen had increased."

"USD/JPY is now approaching last week’s high of 162.84 and could move towards 164.50."

"The fact that intervention has not yet happened does not mean it will not happen."

"As we mentioned last week, positioning remains stretched: the market is long US dollars and very short yen."

"If sentiment turns in favour of the yen, be it because of intervention concerns or other factors, the rebound could be sharp."

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