Frequent “flash jumps and drops” in the yen lead traders to suspect Japan is issuing “warning shots” to the market
According to Golden Ten Data on May 15, this phenomenon has become a recurring feature in yen trading over the past few weeks, sparking heated discussions among investors and strategists: Are Japanese authorities attempting to curb further yen depreciation through small-scale operations? On Thursday, during the New York trading session, the yen-dollar exchange rate surged as much as 0.5% within just two minutes, only to quickly give back all its gains. A similar situation occurred on Tuesday, when the yen also suddenly appreciated significantly by roughly the same margin. On May 8 as well, the yen briefly rose 0.2% before reversing course. Although there is no definitive conclusion as to the exact cause of these fluctuations, traders are highly attentive, as such unusual moves may signal that Tokyo authorities are uneasy about the yen's weakness. Even the mere market expectation that authorities might intervene makes betting against the yen a risky proposition. “My interpretation of these recent moves is that Japan’s Ministry of Finance is uncomfortable with the USD/JPY exchange rate breaching the 160 level and wants to dissuade the market from testing that threshold again,” said Macquarie Group strategist Gareth Berry. “Even before the exchange rate reaches 160, the authorities are proactively launching ‘gentle’ countermeasures and ‘warning shots,’ all pointing to this intention.”
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