DBS FX & Credit Strategist Chang Wei Liang writes that USD/JPY is consolidating around 159 as markets remain wary of potential intervention and hesitate to test 160. He argues that softer Oil prices and lower US yields should support the Japanese Yen (JPY), while strong external demand may give the Bank of Japan (BoJ) confidence to hike in June, barring fiscal missteps.

Pair holds near 159 on intervention fears

"USD/JPY is consolidating around 159, with markets wary of intervention and holding back from testing 160."

"The interim respite in oil prices and slippage in US yields should support the JPY today, but markets are also wary of a possible supplementary budget by PM Takaichi that could weigh on confidence."

"Meanwhile, Japan’s April trade numbers today are as strong as its East Asian neighbours, with exports growing 14.8% y/y (Mar:11.5%) on the back of strong demand for chips."

"Imports growth eased on lower oil purchases from the Middle East, leading to a larger than expected trade surplus."

"This could give BoJ the confidence to hike in June, which should lift the JPY if there are no fiscal mishaps."

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