ING’s Chris Turner highlights that USD/JPY is grinding higher above 162 as higher energy prices pressure Asian currencies. He notes that Japanese authorities may follow a similar intervention pattern to last year, with potential action ahead of the Marine Day holiday. However, he argues intervention alone cannot reverse the bull trend without lower energy prices and a less hawkish Fed.

Authorities eye repeat intervention pattern

"USD/JPY is grinding higher again – as is USD/Asia in general – on the back of higher energy prices. Local authorities continue to try and defend against currency weakness – weakness which would add to the inflation problem. USD/JPY is back above 162 again and looks biased to retest recent highs near 162.70/85."

"In terms of a Japanese intervention strategy, the timing of the FX intervention seen in late April/early May this year was a carbon copy of 2024. And back in 2024, with USD/JPY still bid, Japanese authorities intervened again in July ahead of the Marine Day public holiday."

"That same playbook would point to potential intervention this Thursday/Friday ahead of the public holiday next Monday."

"Of course, intervention alone cannot reverse the current bull trend. For that to happen, energy prices need to come lower and the Fed must conclude that it does not need to hike rates after all. Both of those seem unlikely in the near term."

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