Credit Agricole has observed that recent interventions by Japan’s Ministry of Finance (MoF) and Bank of Japan (BoJ) have impacted the USD/JPY exchange rate. The estimated expenditures for these interventions are similar to previous efforts in 2022, influencing market expectations and risk assessments.
Key Points:
– Preliminary data suggests that BoJ may have spent around USD 55 billion on interventions to support the yen, with significant purchases made last week.
– This level of intervention is comparable to the USD 60 billion spent during the last major effort in September and October 2022, leading to a noticeable depreciation of USD/JPY.
– The interventions by MoF and BoJ have likely created a temporary ceiling on USD/JPY, preventing significant upward movement. This is further supported by dovish signals from the Federal Reserve, reducing expectations of a strong USD.
Conclusion:
Japan’s financial authorities’ joint efforts have subdued the bullish trend in USD/JPY, creating a cautious trading environment. Investors are unlikely to challenge these levels soon, given the strong stance of MoF and supportive rhetoric from the Fed.