(Bloomberg) -- The next big pain point for the yen — and a potential trigger for intervention from Japan — may emerge from a readout on the Federal Reserve’s...
-- The next big pain point for the yen — and a potential trigger for intervention from Japan — may emerge from a readout on the Federal Reserve ’s favored US inflation gauge on Friday.The currency has been in danger all week of sliding through the 160 level to the dollar and on to its weak point for the year, ramping up pressure on Japan to act.
Japan’s top currency official, Masato Kanda, warned on Monday that authorities were standing ready to intervene, 24 hours a day, if necessary, while reiterating they were not targeting a specific level.“PCE is going to be key,” said Nick Twidale of ATFX Global Markets, who has traded Japan’s currency for a quarter of a century. “They’d be pretty crazy to intervene before then — they’ll try to avoid anything before PCE and dollar-yen has been behaving itself.
The Ministry of Finance makes decisions on intervention and uses the Bank of Japan as its agent to buy and sell currencies. Intervening at illiquid times could get “more bang for their buck,” according to Michael Brown, a strategist at Pepperstone Group Ltd.Timing is tricky to assess, of course, but it may only be a matter of time before MOF/BOJ intervention is seen. Until that happens, I would expect the market to push dollar-yen through 160.
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