Japanese Authorities Profit from Post-FOMC US Dollar Drop

Rabobank's Senior FX Strategist Jane Foley notes that Japanese authorities received an unexpected boost from the post-FOMC US Dollar drop, which eased pressure on the Japanese Yen. The decline in the USD's value after the July 29 Fed meeting was particularly beneficial for Japan.

According to Foley, long USD positions were unwound as some market participants had bet that Fed Chair Warsh would deliver a policy tightening to prove his inflation-fighting credibility. These positions were subsequently closed out.

The move lower in the USD was further amplified by Japan's Ministry of Finance intervention in USD/JPY. The MoF was able to temporarily exchange US treasuries for USD via the FIMA Repo Facility, which helped alleviate pressure on the JPY.