USD/JPY, YEN Analysis
Japan’s Leading Currency Official States Recent Yen Weakness ‘Unjustified
Masato Kanda, Japan’s top currency official from the Ministry of Finance (MoF), issued his strongest warning yet against speculative FX movements. However, markets seem unconvinced by his statements, as USD/JPY has effortlessly surpassed previous intervention levels.
Kanda expressed serious concerns over the yen’s recent rapid depreciation, nearing the 4% threshold used to define undesirable declines. Before the April FX intervention, he clarified that a 4% drop over two weeks or a 10% decrease over a month qualifies as rapid. Since hitting a low in May, the yen has depreciated approximately 3.15% over two weeks, approaching the 4% benchmark.
As of the latest update, USD/JPY reached an intra-day high of around 160.81 during the London session and has entered oversold territory according to the RSI.
USD/JPY Shows No Response to Decline in US-Japan Bond Spreads
Recent developments in Japan have pushed Japanese Government bonds above the 1% mark once more, yet USD/JPY continues to hover near or above 160.00 without relief. Traditionally, USD/JPY is guided by the US-Japan bond spread, but currently, the pair seems disconnected from this yield differential.
The Bank of Japan (BoJ) refrained from detailing the much-anticipated tapering of its bond portfolio in its recent meeting, where it had previously hinted at reducing purchases that have kept Tokyo’s borrowing costs low. Instead, the BoJ indicated that specifics would be forthcoming at the July meeting at the end of next month.
This Friday could offer insight into the BoJ’s appetite for bond buying when it is scheduled to announce its new bond purchase schedule. A potential combination of reduced bond purchases alongside a possibly lower US PCE figure might offer a slight respite for USD/JPY heading into the weekend. However, given the recent reluctance to halt its rise, achieving this relief appears challenging.
