classic777vipcom| After the yen fell below 160, it soared 400 points again! The whole world is guessing: Did the Japanese authorities take action?

Topic: why the Japanese authorities did not take action when the yen fell below 160 for the first time since 1990

Financial Associated Press, April 29 (Editor Xiaoxiang) in early trading in Asia on Monday (April 29), the yen fell below for the first time since 1990Classic777vipcomIt reached the 160 round mark, but in the midday period, it soared nearly 400 points all the way in just 30 minutes. This quickly sparked speculation among market traders: did the Bank of Japan intervene in the yen?

Market data show that after surging nearly 300 points throughout the day on Friday, the USDJPY rose strongly again in early trading, breaking the 160 mark at one point, reaching as high as 160.Classic777vipcom. 20 .

However, since 12:10 Beijing time, the exchange rate of the US dollar against the Japanese yen has plunged rapidly, falling all the way from around 159.40 to 155.37, breaking through the four integer levels of 159, 158, 158 and 156 in a row. The huge fluctuation of the yen in a short period of time has undoubtedly attracted the attention of all foreign exchange traders.

In response, some industry insiders speculated whether the Japanese authorities had intervened in foreign exchange-the yen fluctuated almost as much as it did in 2022.

Forexlive analysts said, "it looks like Tokyo must be showing their attitude to the market." I mean, I really can't think of anything or anyone who can push the dollar / yen in this way. But the question now is, if market pressures persist in the short to medium term, can they really maintain this trend? "

Of course, at present, the Japanese authorities have not responded to the sharp fluctuations in the short-term exchange rate of the yen, and it is not known whether the short-term movement of the yen is the result of its action.

Some people in the industry still do not agree that it was the intervention of the Japanese authorities. Shoki Omori, chief strategist at Mizuho Securities, said Monday's sharp fluctuations in the yen against the dollar may be due to Japan's weak liquidity in the public holiday market rather than real intervention. Due to the illiquidity of the yen market during the holidays, the yen is already prone to volatility. The past few days have been moving so fast that the market is likely to take profits at 160 and 159.5 levels. Algorithm-driven account position adjustment may also be driving the market.

Michael Brown, a senior strategist at Pepperstone, said he remained cautious about the Ministry of Finance's intervention in the foreign exchange market because we had not heard of an exchange rate check, which is usually a regular step before the intervention. The fall in the dollar / yen can easily be exacerbated by low liquidity during the holiday season. Of course, the deeper the yen rebounds and the longer it lasts, there will be more and more speculation that Japan's Ministry of Finance is behind it, but only foreign exchange data at the end of the month can tell us the truth.

With regard to the decline in the yen in the morning, many industry insiders have said that the decline occurred in the face of thin liquidity caused by local public holidays in Japan. it may also be a sign that investors are increasing their positions against the yen ahead of the Fed's decision later this week.

Japanese financial markets are closed today for the Showa Day holiday. Due to the scarcity of liquidity, some of the changes in positions that have little impact in the past may trigger a more drastic market.

Vishnu Varathan, head of economics and strategy at Mizuho Bank in Singapore, said the sudden fall in the yen in early Asian trading on Monday could be an "own finger trade". At the same time, it also shows the extreme speculation in the spot and options areas, as well as the high sensitivity of investors to intervention risks. Without official intervention, the market seems to be trying to push the USDJPY towards 160.

Judging from the historical market, what is the current situation of the yen?

It is worth mentioning that according to the historical chart, the last time the USDJPY was above the 160 mark, it dates back to April 1990. At that time, the rally of the dollar against the yen reached as high as 160.35, which meant that it would not take much time for the short yen to further rewrite the market record.

You know, the previous high record of the dollar against the yen will soon be traced back to the level of the Plaza Accord in 1985. In this famous "epic" agreement, five Western countries (the United States, Japan, the Federal Republic of Germany, France and Britain) agreed that the dollar was grossly overvalued and agreed to devalue the dollar by jointly intervening in the foreign exchange market.

Today, the overall background of the global foreign exchange market is clearly very different from that when the Plaza Accord was signed. However, the recent "decline" of the Japanese yen seems to be just like that at that time!

As the chart below shows, the "storm" in the global foreign exchange market this morning seems to be confined to the Japanese yen-the euro and sterling did not show such a strong decline against the dollar.

In intraday trading, the yen fell below 170 yen to the euro, its lowest level since the launch of the euro.

At one point in the morning, the yuan rose above 22 yen to the yen, the highest level since 1992.

Where will the yen fall? No one has a bottom.

There is no doubt that with the yen suffering its worst "epic collapse" in recent trading days, almost everyone is "unsure" about where the yen will fall if the Bank of Japan does not act.

Fiona Lim, senior strategist at Bank of Malaya, said: "without intervention, any attempt to catch the falling knife will be dangerous, especially if the Fed may hint this week that it will have to wait longer to cut interest rates-the yen will break through 160 decisively and the market is testing the Japanese authorities' tolerance for a sharp fall in the yen."

Many people in the industry said that the fundamental crux of the depreciation of the Japanese yen and the appreciation of the US dollar is that, compared with Japan, the US economy is showing the "three highs" of high growth rate, high inflation, and high interest rates. Under the background of the particularly obvious fundamental strength pattern, even if the Japanese authorities take intervention measures, the effect may be extremely limited.

In fact, the expansion of the yen's decline was almost inevitable after the Bank of Japan declared itself "lying flat" in just three paragraphs in its shortest monetary policy statement in history on Friday.

At a news conference after the interest rate meeting, Kazuo Ueda, governor of the Bank of Japan, played down the impact of a weak yen on inflation, saying the exchange rate continued to benefit the Japanese economy by boosting demand.

"Japan is pursuing a policy of turning a blind eye to the weakness of the yen," said George Saravelos, global head of foreign exchange research at Deutsche Bank. If the market becomes chaotic, the possibility of intervention cannot be ruled out, but it is also worth noting that Kazuo Ueda played down the importance of the yen at the press conference and said he was in no hurry to raise interest rates. "

Will the Japanese authorities act?

Before the latest changes in the yen today, what puzzles market participants most is undoubtedly why the Japanese authorities have not acted so long to contain the decline of the yen. At the beginning of this month, foreign exchange traders regarded 152-155 as a "red line" that could trigger Japanese authorities to intervene in the market, but now they have lost the 160 mark for a time.

Strategists at Goldman Sachs believe that the global macroeconomic background suggests that the yen will weaken further, which may make it difficult for the intervention to succeed. "our basic expectations of robust growth, gradual policy adjustment and upside risks in forward interest rates are a very negative combination for the yen. So the only question is to what extent Japanese policymakers will stop the yen from depreciating, but we think their tools are limited. "

However, Goldman Sachs strategists also added that if the yen continues to underperform other assets as it did on Friday, the risk of intervention will rise sharply.

Deutsche Bank's Saravelos says a weaker yen is not necessarily a bad thing for Japan. The depreciation of the yen has not caused the inflation problem, but also pushed up the value of overseas assets held by Japanese investors. He believes that the yen exchange rate continues to have a beneficial effect on the economy by stimulating demand.

Japanese policymakers have repeatedly warned that they will not sit idly by if they depreciate too fast. Japanese Finance Minister Suzuki Shunichi reiterated after the Bank of Japan's decision last week that the government will respond appropriately to foreign exchange trends. Earlier this month, he also expressed concern to U.S. Treasury Secretary Yellen about the fall in the yen, which market participants believe has laid the foundation for intervention.

Japanese Deputy Minister of Finance Makoto Kanda recently said, for example, that the fluctuation of the yen exchange rate of 10 yen in a month is very rapid. It is worth mentioning that the depreciation of the yen has actually been close to this in the past month, falling by more than 10% year-to-date.

Chris Weston, head of research at Pepperstone Group Ltd., said the Japanese authorities may say that they are not targeting the exchange rate level themselves, but they do closely monitor the trend and rate of change in the exchange rate, which indicates that they must act as soon as possible, otherwise they may face a credibility crisis. The foreign exchange market is almost dealing with them like the "bond vigilantes" in the past.

A bond vigilante is a bond trader who threatens to sell or actually sells a large number of bonds in order to protest or express dissatisfaction with the issuer's policy.