Japanese Yen And Interventions

The Japanese yen is little changed against the dollar in European trading while the rate bounced back from the recent intervention of the central bank due to the strong dollar strength by the widening policy divergence with the U.S.

Finance Minister Shunichi Suzuki said the government is “deeply concerned about recent rapid and one-sided moves driven partly by speculative trading while authorities are ready to respond as needed.”

The recent intervention was followed by the Bank of Japan’s decision to maintain its policy of ultra-low interest rates to support an economic recovery.

The Japanese yen is getting pressured for months by the policy divergence with the U.S which recently rose interest rates by another 75bps to fight inflationary soaring prices, supporting the dollar to new highs while the greenback pressures global major currencies.

The annual inflation rate in Japan rose to 3.0% in August, the highest this Year and slightly above the Bank of Japan’s 2% target while keeping interest rate ultra-low around minus 0.1%.

On today’s economic front the Jibun Bank Japan Manufacturing PMI decreased to 51.0 in September with contration in output and new orders. It is the lowest read of this Year’s range which might be inflationary while the Jibun Bank Japan Services PMI increased to a three-month high of 51.9 in September with increased output.

The daily interval of the USD/JPY lurking for yen interest around the bracket highs which is confluent with the upper value extreme of the month developing VWAP value area.

The macro VWAP perspective is strongly imbalanced to the upside as the rate trades above all three major VWAP periodicities: Quarterly, Yearly, and Decades.

Forecasts point to a continuation of the upwards spiral towards 152 yen in the Year’s perspective above the upper standard deviation of the decade’s moving average mean, according to analysts estimates and algorithm calculations. The year’s target might change with possible further interventions of the government or central bank, presumably.

Daily interval inside of balanced price range.

The hourly interval with potential resistance around the month’s upper-value extreme.

Bank of Japan Governor Haruhiko Kuroda said “The intervention was conducted by the finance minister’s decision as a necessary means to deal with excessive moves and I think it was appropriate,” speaking in a media confernece in Osaka after meeting with business leaders. Japan intervened to prop up the yen for the first time since 1998 on Thursday.

He also mentioned the continuation of the ongoing monetary easing because he views the current inflation isn’t sustainable for tightening, seeing the price growth fall back towards the 2% target.

Nikkei 225 Index fell 2.66% and the TOPIX sank about 2.71% to 1,864 in Monday’s Asian trading session. The market is still pressured by the U.S due to the higher inflation, rising interest rates and fears of recession as the Bank of Japan keeps up with its dovish ultra-easing monetary policy to the aggressive hawkish approach of the U.S. Additional pressure factor may be due to the lower Manufacturing PMI which was reported early in the session as mentioned.

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