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Speculation is intensifying that Japanese authorities may intervene as USD/JPY approaches the critical 160 level, with investors increasingly testing whether warnings will be backed by action, OCBC's FX analysts Sim Moh Siong and Christopher Wong note.
Markets test Japan’s resolve as yen hovers near key level
"Market speculation is rising that Japan’s MoF/BoJ could step in with USD-selling intervention as USD/JPY approaches the psychologically critical 160 level. Verbal warnings have helped cap JPY weakness for now, but investors are likely to probe authorities’ willingness to follow words with action."
"A stronger JPY on actual intervention could make the JPY more attractive as a funding currency. Rate hike expectations have edged higher, though mainly in response to currency weakness. For a more meaningful JPY rally, markets need a hawkish BoJ stance and clarity on Japan’s fiscal and political outlook. PM Takaichi may offer more details on a potential snap election on 19 January."







