USD/JPY: Verbal warnings precede key support test – DBS

DBS’s Philip Wee notes that Japanese authorities have sharply escalated verbal intervention as the Japanese Yen weakens toward 160 against the Dollar, citing speculative moves and rising living costs. Markets are watching for possible Ministry of Finance action if USD/JPY fails to break below trendline support at 158.80. The pair remains underpinned near 159 ahead of major central bank meetings.

Yen under pressure near 160 handle

"In Japan, Finance Minister Satsuki Katayama has significantly intensified verbal intervention efforts, characterizing the JPY’s recent depreciation as speculative and disconnected from economic fundamentals."

"Expressing a "strong sense of urgency," Katayama highlighted the adverse impact of a weak currency on domestic livelihoods and the cost of living, signalling that authorities are prepared to take "bold measures" to curb excessive volatility."

"Consequently, markets remain on high alert for direct Ministry of Finance intervention should verbal warnings fail to stabilize the exchange rate ahead of the Bank of Japan policy meeting and Prime Minister Sanae Takaichi’s visit to Washington later this week."

"USD/JPY remains supported around 159 after hitting the year’s high of 159.75 last Friday."

"It needs a sustainable break below the trendline support at 158.80 before considering a retracement of the rise from the 152.25 low on February 12."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)