JPY: Intervention Threat Not a Sustainable Driver for a Weaker Currency - MUFG
JPY: Intervention Threat Not a Sustainable Driver for a Weaker Currency - MUFG
Lee Hardman, Currency Analyst at MUFG, notes that the yen has
strengthened in the Asian trading session partially reversing weakness
from early this week.
Key Quotes
“It is
the first day this week that Japanese officials have not verbally
intervened which is encouraging the yen to regain some lost ground. It
is consistent with our view that the threat of intervention is unlikely
on its own to support a sustained re-weakening of the yen. Economic
fundamentals including the weak global growth outlook remain supportive
for a stronger yen. At best verbal intervention may help to yen strength
in the near-term by curtailing speculative demand for long positions.
Bloomberg
has also reported comments overnight from Koichi Hamada, an economic
advisor to Prime Minister Abe, stating that rapid yen gains which lower
USD/JPY towards the 100.00 level could trigger intervention. However he
does not expect it to prove necessary believing that USD/JPY is
unlikely to drop below the current 105-110 range. He believes that Japan
retains the right intervene directly but admitted that it faces a
dilemma given that the US may oppose intervention ahead of the
presidential election which also poses possible risks for the
ratification of the Trans-Pacific Partnership (TPP) trade agreement.”
