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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
JAPAN
- With USD/JPY's incline accelerating not just in September, but across the entirety of 2022, the authorities' approach to currency has evolved. Despite the step-up in language, however, authorities look unlikely to intervene while yield spreads and FX rates remain coupled.
- Today's missive in Jiji from finance minister Suzuki was a notable step-up in communication, with the phrase 'one-sided' appearing for the first time since 2018: "moves in JPY are one-sided, I am concerned".
- Asakawa, former senior FX policy bureaucrat, and Aso, former finance minister, were the last to use the phrase, but were addressing USD/JPY's decline from Y112 to Y106. That phase of JPY strength concluded with no official intervention.
- The language tweak has so far failed to reverse the tide for USD/JPY, with markets focusing instead on the presence of a number of phrases that are becoming more routine: "weak JPY has merits and demerits", "sudden moves are undesirable", "closely watching negative impacts of weak JPY".
- Similarly, Suzuki's comment as of end-August that FX moves were "basically inline with fundamentals" feeds into the view that as long as US-Japan yield differentials are coupled with the exchange rate, the authorities will learn to live with a higher exchange rate as an indirect consequence of the BoJ's YCC.
- Another convening of the BoJ, MoF and FSA, however, would raise speculation of near-term action. The three authorities last met in June, but only a material breakdown in the yield/FX correlation will likely trigger action now.
Figure 1: JPY and rate differentials remain coupled, for now
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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