MUFG is wary of Bank of Japan intervention in the yen, citing USD tailwinds (from the Federal Open Market Committee (FOMC) minutes specifically) and JGB yields.
- The short-term bias remains favourable for the Dollar and the minutes and the data support that view.
- The further strengthening of the Dollar has brought USD/JPY into the danger zone for intervention to halt the move higher. Resistance to a higher USD/JPY could at least involve allowing the 10-year JGB yield to drift further higher. You cannot fight a weaker Yen and higher yields in a credible manner.
- From an intra-day low on 28th July, USD/JPY is 8 big figures higher so this move is of a scale that could justify action.
Since the note USD/JPY has dribbled a little lower, a stay of execution.
ps. JPY alert: The clear signals to watch for imminent Bank of Japan FX yen intervention
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Mitsubishi UFJ Financial Group is the world's second-largest bank holding company and second largest public company in Japan.
