Japan’s strategic currency interventions have caused significant chaos for Yen pairs, especially the USD-JPY. Let’s take a little walk through the haunted house that has been the USD-JPY since yesterday.
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- 3:23 PM EST, Wednesday: The USD-JPY takes a nosedive. It’s the Bank of Japan (BoJ) behind the curtain, pulling levers right after the U.S. markets shut, choosing a time when intervention costs them less but looks a tad desperate.
- 3:30 PM EST, Wednesday: As USD-JPY stumbles below the 100-hour moving average, it’s a free fall to the 200-hour line at 155.96, briefly touching 155.78 before clawing back.
- 3:35 PM EST, Wednesday: The Yen’s plunge continues, breaking past 155.00 in what appears to be another round of BoJ’s cost-effective intervention during off-peak hours.
- 4:45 PM EST, Wednesday: Masato Kanda, Japan’s top currency diplomat, dodges questions about intervention. No surprise there.
- 5:25 PM EST, Wednesday: Insights into the Ministry of Finance’s tactics reveal a tight budget, with interventions draining resources but barely managing to hold the Yen’s decline at bay.
- 10:00 PM EST, Wednesday: Rumors suggest that Japan might set a soft cap at 160 for USD-JPY while interventions continue to bleed the coffers.
- 12:01 AM EST, Thursday: Japan doesn’t let the clock stop its efforts, with another intervention noted.
- 12:55 AM EST, Thursday: Consumer confidence dips in Japan; a reflection of the Yen’s woes and economic sentiment.
- 2:45 AM EST, Thursday: Kanda, again, hints at readiness to combat excessive FX volatility, stressing round-the-clock vigilance.
- 4:15 AM EST, Thursday: Leaked BoJ accounts suggest heavy financial artillery was deployed on May 1, with billions in Yen spent to fend off further declines.
The events paint a picture of a BoJ caught in a relentless struggle to prop up the Yen, navigating thin liquidity to stretch their limited resources. But FX traders should remain vigilant. They don’t call the Yen the ‘Widow Maker’ for nothing.