Alongside the surge in USD/JPY Japanese authorities have insisted, over and over again, that the rate should trade in a stable fashion 'driven by fundamentals'. And over and over again the market has insisted that a 500+ or so bp differential between US and Japanese rates are a solid fundamental.

The IMF have weighed in, an official speaking on Saturday saying:

  • "On the yen, our sense is that the exchange rate is driven pretty much by fundamentals. As long as interest rate differentials remain, the yen will continue to face pressure"

Adding that the IMF assesses intervention in the FX market to be justified only when there is a severe dysfunction in the market, a heightening of financial stability risks, or a de-anchoring of inflation expectations:

  • "I don't think any of the three considerations exist right now"

The IMF is, of course, correct. The concern now is that once these folks recognise it maybe the trend is nearing completion.

But not before a more determined crack at taking the rate above 150 next week I'd suggest:

usdyen 150 attack 15 October 2023

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