YEN: Latest on the Japanese Yen: USD/JPY Traders Skeptical of Government Intervention as 150 Approaches

Oct 18, 2022
VOT Research Desk

Market Analytics and Considerations

As long as US Treasury yields stay in control, the USD/JPY crosses above 149.00.

The finance minister issues a warning regarding “extreme actions.”

Earlier in the session, the Japanese Yen dropped to lows last seen in August 1990 as it continues to lose value against the US dollar. Little has changed for the Yen as Japanese authorities appear ready to allow the currency to continue to decline by controlling bond yields.

The yield on 10-year JGBs is restricted to 0.25%. In contrast, as the Fed keeps raising interest rates, US Treasury yields continue to trade at or close to multi-year highs. The baseline 10-year UST is quoted with a yield of 4.00%, which is approximately 375 basis points higher than the comparable JGB. The rate-sensitive 2-year UST trades with a yield of about 4.45%.

Intervention in the foreign exchange market by the Bank of Japan (BoJ)

Shunichi Suzuki, the finance minister of Japan, issued a warning regarding potential intervention to restrain excessive moves in the foreign exchange market in response to recent USD/JPY movements. According to Suzuki, authorities are “closely observing market fluctuations” and will at any time take “appropriate” action to reduce excessive volatility.

The BoJ sold USD/JPY during its market intervention last month, but their efforts were ineffective in halting the pair’s persistent slide. As the yield spread here between two currencies continues to widen and the psychological level of 150 gets closer, the markets may soon put the Finance Minister’s commitment to the test.

According to data from retail traders, 18.31% of traders are net-long, with the short-to-long ratio standing at 4.46 to 1. The number of investors who are net-long has increased by 11.53% from just the other day and by 5.84% from the previous week, while the number of traders who are net-short has increased by 5.23% from yesterday and by 9.20% from the previous week.

Since we normally don’t agree with the general consensus, the fact that traders are net short signals that the price of the USD/JPY may rise further. Positioning is more net-short from last week than it was yesterday. We have an additional split USD/JPY trading bias as a result of the present mood and previous adjustments.

Technical Measure

USD/JPY (Daily)

Exponential Moving Averages (daily)