In their response to the yen0buying intervention out of Tokypo on Thursday ING say that:

  • Japanese authorities could well be doing battle with the FX market for the next 6-9 months as the dollar stays strong
  • it looks like the Japanese government wanted to stop a quick run to 150

ING make point out the inconsistencies of yesterday's intervention:

  • Presumably, Tokyo wanted to break the cycle of an ever-higher USD/JPY, even though Japan’s policy of effectively draining liquidity with JPY buying operations is at odds with the BoJ’s ongoing JPY-liquidity add through its various quantitative easing programmes.
  • Japanese officials will be well aware of this contradiction and probably hope to slow or stabilise USD/JPY – rather than actively seek a reversal of the very powerful dollar bull trend.

And likely tensions with Japan's G20 commitments:

  • Either authorities had Washington’s blessing or they wanted to flex their domestic policy muscles against the overriding G20 mandate of flexible exchange rates. The issue now will be whether G20 central bankers and finance ministers agree that FX markets have become disorderly when they issue their next Communique on 12 October.

ING forecast:

  • one can argue that we will now enter a volatile 140-145 trading range
  • But expect investors to be happy to buy dollars on dips near 140/141 knowing that Tokyo will find it impossible to turn this strong dollar tide – a tide that should keep the dollar supported through the remainder of this year.
usdyen daily 23 September 2022