DBS Group Research strategist Chang Wei Liang notes that USD/JPY has broken above 161, returning to levels that previously triggered official action. He highlights that speculative Japanese Yen shorts remain elevated despite the recent BOJ rate hike, and argues that Japan’s tolerance for further Yen weakness is nearly exhausted, raising the likelihood of renewed intervention and stronger rhetoric from authorities.

Authorities eye renewed Yen intervention risk

"USD/JPY has broken above 161, reaching levels that previously triggered market interventions."

"While this rebound is broadly consistent with USD strength following the FOMC, it also highlights that large speculative JPY short positions have not eased despite the BOJ’s rate hike this week."

"Japan’s tolerance for JPY weakness appears close to its limit, given that authorities intervened to sell USD/JPY to the tune of USD73bn in late April-May."

"Policymakers may deploy both rhetoric and further market interventions to curb JPY depreciation, with falling oil prices also offering some support to the currency."

"Brent prices have now declined to around USD76, which should temper inflationary pressures and support oil-sensitive Asian currencies."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)