USD/JPY: Intervention Unlikely, Unless… - ING
According to James Smith Economist and Viraj Patel, Foreign Exchange
Strategist at ING, intervention from the Finance Minister and the Bank
of Japan is unlikely unless USD/JPY drops sharply to the 100 - 105 area.
Key Quotes:
“Chief
Cabinet Secretary Suga’s comments that FX market moves are “one-sided”
and “excessive” is a clear sign that officials are becoming increasingly
nervous over JPY strength.”
“Yet, while the odds of FX
intervention have slightly risen, we still remain some distance away
from any material MoF/BoJ action. With PM Abe reluctant to go down the
route of competitive devaluation ahead of the G7 summit in May, intervention looks unlikely unless USD/JPY sharply drops into the 100-105 area.”
“Unilateral FX intervention has historically been ineffective,
with the impact typically short-lived. Only the Mar 2011 intervention
following the tsunami crisis in Japan had any enduring effect on the
yen; this was almost certainly due to the fact that the move was
coordinated with other G7 central banks.”
“Given that FX
intervention is unlikely for now, the pressure has increased on the BoJ
to deliver some form of stimulus at the 28 April meeting. The economic
case for easing is clear, so the two main questions are (a) what
options do the BoJ have and (b) can these measures reverse or even stem
the JPY’s current upward trend.”
“Overall, the BoJ may well find itself between a rock and a hard place should JPY strength persist ahead of the 28 April meeting.
With intervention unlikely this side of 105, the BoJ’s biggest
challenge will be to deliver a stimulus package that does more good than
harm. Getting it wrong could prove costly in terms of fuelling JPY
upside.”
(Market News Provided by FXstreet)
