USDJPY continues to trade in the 144 yen range, with a slight sense of caution regarding potential intervention. However, there is not a strong sense of urgency in the market. Last week, the cross-discussions among the central bank governors of Japan, the US, the UK, and the Eurozone at the ECB Forum highlighted the contrasting monetary policies, with the Bank of Japan’s aggressive easing stance standing out against the tightening stance of other central banks. The expectation of widening interest rate differentials between Japan and other countries is driving the yen weaker.
The Japanese government has been consistently expressing its desire for a weaker yen in recent weeks, but there doesn’t seem to be a heightened sense of urgency for intervention similar to last year. Concerns about “excessive yen weakness” have receded, and there is a subtle sense of anticipation for inbound demand. Finance Ministry official Kanda has stated that the speed of intervention is more important than the level, suggesting that the current pace of yen depreciation is not viewed as a panic situation.
In terms of trading strategy, we plan to consider selling if the USDJPY stalls at higher levels or buying if there is a significant decline in the exchange rate.
