This week has seen the ongoing strengthening of the US dollar. After a series of major central bank policy announcements in previous weeks, expectations of prolonged high-interest rates by the US Federal Reserve have provided support for the strong dollar. Notably, the movements in selling government bonds (resulting in rising yields) in major countries have become prominent. Portfolios centered on bonds seem to be under pressure. Given the continued high oil prices and persistent wage pressure, the roots of inflation remain. Furthermore, expectations of prolonged high-interest rates appear to be gaining a solid foothold.
Regarding the USD/JPY, Finance Minister Suzuki’s remarks on yen depreciation have been reported daily, and tension over intervention seems to be gradually spreading. However, unless there is a significant catalyst or event that causes the USD/JPY exchange rate to surpass the 150 yen milestone, determining the timing for intervention also appears to be challenging. This week marks the end of the month, and today is the settlement day for the last business day of the month. It cannot be ruled out that the USD/JPY exchange rate may become volatile due to a flow-driven development.
While the US dollar, in general, is on the rise, cross yen pairs are trading weakly, and their downward speed exceeds the upward speed of the USD/JPY. Behind the pressure for yen appreciation, there is a risk-off aspect resulting from concerns about intervention as well as the softness in the stock market.
Finance Minister Suzuki has commented, “I am closely monitoring the situation with a strong sense of tension.” Still, the USD/JPY exchange rate is currently trading in the 149-yen range. Actual intervention is expected if it rises above 150 yen.