Critical data awaited for yen intervention
It is commented that Japan should not intervene in the depreciating yen before the critical core PCE data to be announced in the US on Friday.
The core PCE data to be released on Friday in the US, which is the inflation indicator monitored by the Fed, will be of critical importance for the Japanese yen as well as all global markets.
Pressures on the Japanese yen continued throughout the week as the dollar/yen exchange rate approached the critical 160 level. This increased the intervention pressures on Japanese authorities.
However, market participants believe that since the PCE data will determine the outlook for US interest rates and thus the yen, any steps taken before the release of this data would be premature.
After interventions in April-May, Japanese authorities tried to respond to this week’s losses with verbal interventions.
“Japanese authorities will at least wait for Friday’s PCE to decide on intervention, even if the dollar/yen crosses 160 before that,” said Takafumi Onodera, head of sales and trading at Mitsubishi UFJ Trust & Banking Corp. in New York.
“A stronger-than-expected data could increase volatility and lead to a rise in the exchange rate towards 163,” Onodera said, adding, “This could prompt the authorities to intervene.
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