The yen strengthened rapidly against the US dollar, with traders remaining cautious that authorities will be forced back into the forex market again. It rose as much as 1.2 per cent to 158.22 per dollar, a move so abrupt that it is making market players wait to see whether officials will intervene in the market.
The yen gained earlier in the session after BoJ’s Hajime Takata, one of the central bank’s most hawkish members, left the possibility of an oversized interest rate jump and a sequence of rises on the table.
Tokyo and Washington have linked arms to buttress the yen to an extent we haven’t seen in decades, raising the stakes for anyone whose money is on a rout of the world’s third-largest economy. The joint purchase of the yen is their first since 1998, sparking a rally of some 5 percent from just over a four-decade low of around 164, and Tokyo and Washington have indicated additional intervention may come in co-ordination.
Hedge Fund Positioning: After dramatically cutting net-short yen positions following July’s joint operations, speculative accounts and hedge funds have steadily rebuilt bearish bets against the currency.
The Bank of Japan (BOJ) Factor: Markets are heavily pricing in a potential interest rate hike by the BOJ. Some analysts note that authorities may look to see whether monetary policy shifts can naturally bolster the currency before launching another expensive round of direct intervention. Official rhetoric continues to emphasize that the true trigger for intervention isn’t a strict line in the sand, but rather the speed and disorderliness of currency movements.
Olumide Adesina
Financial Market Writer
Olumide Adesina is a French-born Nigerian financial writer. He tracks the financial markets with over 20 years of working experience in investment trading
