The dollar has slowly moved into the 160 yen level.

The positions of Japanese domestic margin providers appear to be slightly short the dollar.

As the dollar-yen exchange rate approached 160 yen, Treasurer Kanda stated that ‘currency intervention, 24 hours a day, 7 days a week’ to check further depreciation of the yen. Regarding Japan’s inclusion on the watch list in the US foreign exchange report, he said that there was “no impact at all”.

The USD/JPY pair was pushed down by profit-taking selling and gradually fell below the ¥159 level, but the rate of decline quickened sharply from below ¥159.50 to below ¥158.80, but soon returned to ¥159.30. The price movement was reminiscent of ‘intervention’, but was it simply the result of a series of stop-losses being triggered?

The BOJ’s “Main Opinion” also hinted at a rate hike in July, but it was too early to make a decision. Only intervention warnings are restricting the upside, but a rise above 160 yen before the BOJ and counter intervention are likely. The departure of Treasurer Kanda is also a concern. End-of-month rebalancing flows are selling dollars, but there may be another chance to buy dollars in July.

At 1.07%, Japan’s long-term interest rate is approaching 1.1%, its highest level to date. However, the world is bracing itself for the possibility of another interest rate hike, as inflation indicators in Canada and Australia exceeded expectations. US property prices have started to rise despite rising interest rates. Clearly, it is not working. If US interest rates rise, no matter how much Japan threatens to raise rates, it will be little more than a water pistol.

There are some expectations of intervention if the yen reaches 160, but it is not clear whether the Japanese monetary authorities will intervene immediately. If they say they are not trying to change the tone and are trying to limit excessive volatility, then the next level of intervention could still be higher.

Translated with DeepL.com (free version)