Joint US-Japan Intervention Caps USD/JPY Near 160

The recent intervention by Japanese and US authorities has had a significant impact on the USD/JPY exchange rate, causing it to drop over 3% in just five days.

According to ING, the joint action was more of a 'containment exercise' aimed at limiting investors from pushing the pair above 160, rather than attempting to force a lasting Yen revaluation.

The bank's analysts struggle to see this bilateral action driving USD/JPY sustainably below 155, as the underlying policy picture remains unchanged.

ING suggests that Washington may have become concerned about Tokyo selling US government bonds, which could add pressure to long-dated Treasury yields. The use of the Federal Reserve's FIMA repo facility would allow Japan to raise Dollars against Treasury holdings instead of selling them outright.