Credit Agricole: Finger on the JPY intervention trigger

Credit Agricole highlights Japan’s readiness for currency intervention as the JPY faces downward pressure, quoting Masato Kanda, Japan’s Vice Minister of Finance for International Affairs. Kanda’s recent statements signal a strong inclination towards supporting the JPY against speculative forces driving its depreciation. His remarks have heightened expectations for potential intervention, especially as USD/JPY approaches levels close to those seen during previous interventions in October 2022.

Key Points:

• Intervention Signals: Masato Kanda’s comments indicate a high likelihood of Japan intervening in the currency market to curb excessive JPY fluctuations, emphasizing that current movements do not reflect economic fundamentals.
• USD/JPY Monitoring: With USD/JPY nearing the 151.95 level, reminiscent of the intervention point in October 2022, the threshold for potential action seems to be around the 152 mark.
• Model Analysis: Credit Agricole’s FAST FX model suggests that USD/JPY is becoming increasingly detached from its short-term fundamentals, with a fair value estimate slightly adjusted upwards last week. The model would indicate a selling strategy for USD/JPY if it crosses 152.20, marking a significant overvaluation.

Conclusion:

The firm stance of Japan’s finance officials on the possibility of currency intervention to support the JPY underscores the tension surrounding its current weakness. Kanda’s pointed remarks and the analysis from Credit Agricole’s FAST FX model both suggest a critical observation of USD/JPY levels, with a clear readiness to act against perceived speculative movements. As USD/JPY hovers near critical levels, market participants are on high alert for any signs of intervention, which could significantly impact JPY’s trajectory in the near term.

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This article was written by Adam Button at www.forexlive.com.