USD/JPY turbulent 200 pips, the issue of intervention is rife

The Japanese suspicious market carried out currency interventions, because the USD/JPY was suddenly sinking from the threshold of 150.00 to 147.30.

The market witnessed suspicious upheaval in USD/JPY last night. In the middle of the New York session, this ninja duet suddenly collapsed up close to the threshold of 150.00 to the lowest level at 147.30. However, the decline did not last long. In a short time, USD/JPY bounced back to the 149.00s and survived in that range until the Asian session today (4/October).

USD/JPY turbulent 200 pips, the issue of intervention is rife

Market participants have long speculated regarding the intervention area above the threshold of 150.00. That said, Japan will immediately intervene to intervene in the market if the Yen exchange rate weakens to more than 150 yen per US dollar.

The upheaval of USD/JPY last night seemed to confirm the speculation. However, Japanese officials refused to comment.

The opinions of experts and market analysts are now divided. Some believe Boj secretly intervened in currency, although no Japanese officials admit it.

"(USD/JPY's upheaval) has all the characteristics of intervention," said Michael Brown, market analyst at trader X, "is an extraordinary coincidence if (intervention) does not occur (at that time)."

Others believe that the upheaval occurs solely because there are market participants who are afraid when USD/JPY breaks through 150.00. Data shows that USD/JPY turns around 4% when Japan conducted interventions in September and October 2022, while yesterday's upheaval was only around 2%.

"It could be that people expect intervention and then react to what they believe to be an intervention," said Colin Asher, senior economist in Mizuho in London, "However, it is very rare for a currency to move so aggressive certain. Such movements are usually interventions. "

Japanese Finance Minister Shunichi Suzuki refused to comment altogether. He only said that the exchange rate must move stable to reflect fundamentals.

Masato Kanda, Deputy Minister of Finance for foreign affairs, met with Prime Minister Fumio Kishida today. Kanda only said that they discussed "Economics in general" and refused to say whether the topic included Yen's exchange rate. He asserted that Japanese intervention will only target market volatility and not a certain level of yen.

Apart from the intervention or not, the bullish pressure over USD/JPY is still very strong. In situations like this, a decrease in USD/JPY for any reason is likely only temporary correction. Except when a fundamental catalyst appears that drops the interest of buying US dollars and increases the yen buying sentiment at the same time.

"It is unclear whether Tuesday's volatility is caused by intervention. When viewed from government policies and the remaining devices in Japan, the Ministry of Finance will most likely take action," said Yoshimasa Maruyama, Head of the Market Economist at the Nikko Securities SMBC, as reported by Reuters, "but When the Yen Selling pressure continues, the opportunity for intervention to reverse the dollar/yen trend is not high. "