Forex Top Team

Watch out for sudden fluctuations in the dollar/yen due to intervention, but is there no change in the trend of a stronger dollar?

Along with the rise in US bond yields, the underlying trend of a strong dollar continues. Markets are pricing in rate hikes of 75 basis points each at the next two US FOMC meetings later this year. On the other hand, the BOJ’s stance of continuing monetary easing remains unwavering. Expectations of a widening interest rate differential between Japan and the US are forming a strong trend of strong dollar and weak yen. Yesterday, the dollar-yen exchange rate reached the 150-yen level, a psychological milestone.

Amidst this, there are growing concerns about yen-buying interventions by the government and the Bank of Japan. However, as long as it shows a stance of responding to sudden fluctuations rather than the level, it seems that it will be difficult to take a full-fledged intervention. The limitations of single intervention have also been pointed out. After the Sept. 22 intervention with a clear message, it quickly bounced back after a couple of moves that were purported to be undercover interventions. It seems that it will be difficult to reverse the trend of yen depreciation and dollar appreciation.

If there is a change in the direction of the dollar’s appreciation, it is likely that the US FOMC’s theory that there will be a limit to rate hikes will need to increase. In order to do so, it is essential that the outlook for inflation peaking out expands. So far, we’ve seen very few signs of that. Inflationary pressures are still widely observed, even as energy price increases subside.

With the weekend approaching today, it is pointed out that short-term adjustment pressure and market liquidity will wane. It should be noted that if the movements of the yen depreciation and the dollar appreciation accelerate in overseas markets, the yen-buying intervention will be cautious. The August 1990 high for the dollar/yen was at the 151.55 level. Although it is more than 1 yen away from the current level, it seems to be a level to watch.

Regarding the pound, Prime Minister Truss resigned yesterday. It was a resignation of responsibility for the series of economic policies that caused market turmoil. The pound exchange rate showed a buying reaction for a while, but soon converged. The turmoil in the market seems to have settled down. In the future, attention is likely to shift to the UK Monetary Policy Committee (MPC) meeting on November 3.


USDJPY’s rise shows no signs of abating. There are signs of masked intervention, but no effect.

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