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Yen Capitulates After Friday's Intervention


The yen is in retreat again after Japanese officials intervened aggressively last Friday to arrest its decline. Spot USD/JPY has added 1.23 figure to last trade at Y148.88, with the yen lagging all its G10 peers.

  • The authorities stepped in after hours Friday, taking advantage of thin liquidity, and took action to prop up the yen. The intervention was not officially confirmed, but was flagged in a number of source reports. It may have been to the tune of over $30bn, according to an FT article.
  • Fundamentally, the current conditions are skewed towards continued yen depreciation, which raises questions over the sustainability of Japan's policy mix. The BoJ has been adamant to stick with its ultra-loose monetary settings amidst a global wave of tightening. Japan's central bank will review monetary policy this Friday.
  • Better risk tone may amplify selling pressure to the yen. U.S. e-minis trade on the front foot, while the Nikkei 225 futures are pointing to a firmer open, after a decent Wall Street session last Friday.
  • USD/JPY implied volatilities surged ahead of the weekend, across the curve. One-week tenor was the big gainer, with 1-week/1-month & 1-week/1-year spreads plumbing new four-month lows.
  • From a technical viewpoint, eyes are on the multi-decade high printed last Friday at Y151.95. Bears look for losses towards former psychological resistance at Y150.00.

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