DBS Group Research’s FX & Credit Strategist Chang Wei Liang notes that USD/JPY is trading close to 160, a level seen as a potential trigger for FX intervention. Despite firmer expectations for a Bank of Japan rate hike on 16 June, the Japanese Yen remains weak, pressured by high Oil prices and fiscal concerns, while renewed official rhetoric highlights tolerance for bold action against excessive FX volatility.

Yen pressured as intervention risks grow

"USD/JPY is trading close to the 160 level that is perceived as a possible trigger for FX intervention."

"Despite BoJ Governor Ueda’s speech this week that cemented rate hike expectations for 16th June, the JPY has remained under pressure amid elevated oil prices and fiscal concerns."

"Rhetoric over the JPY has returned, with Finance Minister Katayama reiterating that bold actions are permitted in the US-Japan FX statement, with US Treasury Secretary having said in May that excessive volatility in FX markets is undesirable."

"US non-farm payrolls today will be watched, providing a key data-point before Warsh’s first meeting as Fed Chair later this month."

"A resilient US labour market with payrolls above 100k will make it hard for Warsh to lean dovish, especially as US inflation remains buoyant due to energy prices."

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