ING’s Chris Turner argues USD/JPY is now firmly in intervention territory, with markets watching whether any action involves only Japanese authorities or a fully joint move with the Federal Reserve. He suggests unilateral or agent-based intervention would likely have only limited, short-lived impact while sustained downside in USD/JPY requires a reversal in global energy prices.

Yen vulnerable despite intervention talk

"USD/JPY is now firmly in intervention territory. If we do see intervention, the market will be looking out for whether it is just Japanese intervention, whether the Fed is selling USD/JPY just as an 'agent' for the Bank of Japan or whether this is a fully joint intervention with the Fed doing 'own account' intervention for the US Treasury."

"The first two options probably only have a limited and short-term negative impact on USD/JPY, while the third option might be longer lasting and tap into ideas that Washington is ready to fight the recent dollar strength. We felt a couple of weeks ago that one week USD/JPY traded volatility was too low at under 10%, and it could easily be marked through 12% as USD/JPY threatens 160."

"The problem for authorities in Tokyo and Washington, however, is that USD/JPY will not turn sustainably lower until energy prices reverse."

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