Yen fights back after Fed meeting, second suspected BoJ intervention
Following the FOMC's hint at future rate cuts and a sharp drop in USD/JPY, likely due to BoJ's market intervention, the yen held on to gains. With USD/JPY near 153.00, speculations rise on BoJ's next moves.
Data current as of 5/2/2024
Key points
- Fed Chair Powell confirmed rate cuts are next, possibly this fall
- USD/JPY tumbled over 300 pips in less than an hour yesterday - pointing to BoJ intervention
- The yen gained further on USD today, in a sign of stability
- USD/JPY's current price level—around 153.00—is still very high, historically
Fed Chair Powell confirms cuts are coming...eventually
In the latest Federal Open Market Committee (FOMC) meeting led by Fed Chair Powell, a key message emerged: the Fed's next monetary policy move is likely to be a rate cut. However, this decision hinges on inflation rates aligning with the Federal Reserve's target of 2%, making it difficult to time the first rate cut. Predictions from CME futures traders peg November to be the likely target date of the first cut.
USD/JPY plummeted 300 pips from likely Bank of Japan buyback
Shortly after the Fed meeting, USD/JPY experienced a sharp decline, dropping over 300 pips within an hour. This jarring movement is strongly attributed to the Bank of Japan (BoJ) actively stepping in to buy back yen, a move aimed at stabilizing the currency amidst volatility. This marks an implied second intervention by the BoJ in the week following the USD/JPY reaching an all-time high above 160.00 on Sunday night. Analysts monitoring the Bank of Japan's financial accounts confirm outflows that corroborates both instances.
USD/JPY price action
Yen holds onto gains, falling near 153.00
A day after BoJ's intervention, the yen exhibited resilience. Immediately after the move, JPY lost some traction. However the USD/JPY's trading activity on Thursday pointed towards an optimistic trend for the yen, which saw a steady decline to approach 153.00. This performance indicates sustaining momentum from the intervention measures.
What's next for the Japanese yen
Despite the yen's recent 3% appreciation, the USD/JPY trading around 153.00 remains notably high by historical standards. Reflecting on past BoJ interventions, notably in 2022 when USD/JPY was below 152, questions arise about the future course and effectiveness of such measures in curbing yen's volatility.
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