Dollar-Yen Peaked After Joint Intervention: Yen Could Reach 125

The 'dollar smile' creator, Stephen Jen of Eurizon SLJ Capital, believes that the dollar-yen pair has peaked and could hit 125 per dollar. This prediction comes after a joint US-Japan intervention on July 30-31, where they spent $87 billion buying yen.

However, the market is not listening yet, with the yen falling 1% to 159.27 per dollar, its weakest level in recent times. The problem lies in Japan's finances, which make it harder for them to defend their currency. Government debt has hit a record $69,000 per resident, and bond yields sit at 31-year highs.

Robin Brooks of the Brookings Institution is skeptical about any lasting recovery for the yen, arguing that BOJ bond buying blocks any significant gains. On the other hand, Michael Gayed expects a 'mother of all short squeezes' to hit the yen in the coming weeks.