Yen Bears Stay on Intervention Alert Even as Efficacy Questioned

Ruth Carson, Daisuke Sakai and Winnie Hsu, Bloomberg News

Japanese yen coins of various denominations arranged in Kawasaki, Japan, on Friday, June 23, 2023. Tokyos FX traders are scanning the airwaves for official comments as the yen slumps toward levels where the government intervened to prop it up last year. Photographer: Akio Kon/Bloomberg , Bloomberg

(Bloomberg) -- A whipsawing yen is fueling speculation that Japanese officials had intervened again to prop up Japan’s flailing currency — a warning for bears that they risk getting burned if they go too far.

But the yen shed some of its gains in Asian hours after advancing more than 3% against the dollar in late New York trading, reflecting trader skepticism that authorities will be able to prevent the currency from sliding for long. A wide interest-rate gap between Japan and the US will likely keep pressure on the yen, analysts say.

The Japanese currency has dropped to around 156.00 after surging more than 3% to 153.04 per dollar. Japan’s top currency official Masato Kanda said early Thursday that he had nothing to say on whether authorities intervened in the foreign-exchange market.

Here’s what analysts and strategists had to say:

Calvin Yeoh, portfolio manager at Blue Edge Advisors:

“It’s going to always be about volatility. A retest of the 160 level will see the yen get bought with or without intervention for now. After that we can see new lows sustained on a slow grind but surely any spikes lower calls the MOF to loudly intervene.” Yeoh took profit on his short yen positions earlier this week.

Kyle Rodda, strategist at Capital.com:

Markets were “caught off guard by what appears to be another sneak attack from Japan’s Ministry of Finance, with a rapid move in the yen last night displaying the hallmarks of further intervention. It appears authorities are sending a warning to markets and attempting to punish yen short-sellers and force them to think twice.”

Kristina Clifton, senior currency strategist at Commonwealth Bank of Australia:

“In our view the MOF face an uphill battle to sustainably strengthen the yen given strong fundamentals such as wide interest rate differentials between the US and Japan and healthy risk appetite.”

Naomi Fink, global strategist at Nikko Asset Management

“It is certainly within the realm of the possible for the MOF to intervene to sell foreign reserves if it believes that forex moves risk becoming disorderly. However, noting that yen-buying intervention is different from yen-selling intervention – Japan can only print yen, but cannot print foreign currency – so the ability to engage in the former is more limited than the latter, even despite the presence of plentiful FX reserves.”

Shoki Omori, chief desk strategist at Mizuho Securities Co.:

“There’s no silver bullet for yen. MOF likely intervened but couldn’t break 152, where investors used to be cautious. Now that the MOF has shot two bullets but gave the impression that it cannot stop the yen cheapening trend alone, markets participants will likely feel more comfortable to short yen.”

Takeru Yamamoto, trader for global markets at Sumitomo Mitsui Trust Bank in New York:

“The price action appears to be currency intervention. With a slightly weaker dollar also coming, demand to pick up more and more USD/JPY as it heads lower may not be too big.”

--With assistance from Michael G. Wilson.

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