Joint Intervention Sends Shockwaves Through FX Market as USD/JPY Plummets

The recent joint intervention by Japanese and US authorities has sent shockwaves through the foreign exchange market, causing the USD/JPY to plummet over 3% in just five days.

The pair dropped from a high of 162.80 to a low near 155.35 before settling into a narrower range around 157.50, with some analysts predicting that this could be the new battleground for traders.

Foreign exchange analysts at ING expect joint US-Japan intervention to cap USD/JPY near 160, but they doubt that the move can drive the pair sustainably below 155 without stronger Yen fundamentals.

The problem for the Yen is that the intervention does not alter the main drivers behind the pair, with a Fed close to hiking and Tokyo running a loose set of monetary and fiscal policies weighing on the currency. The operation may limit investors from chasing USD/JPY through 160 and buying time for Tokyo to introduce more Yen-positive policies.