TD Securities: Intervention-Driven Yen Gains May Be Short-Lived

TD Securities strategists view the recent decline in USD/JPY as cyclical rather than regime-changing, triggered by intervention from Japan's Ministry of Finance (MoF). They see December as a more likely time for the next Bank of Japan (BoJ) rate hike and doubt sustained joint US-Japan intervention support.

The strategists argued that the JPY was in need of near-term domestic policy support, which materialized shortly after their report. The MoF's intervention led to a decline in USD/JPY, but TD Securities sees room for it to drift toward 153.00 in the short term due to lack of strong US official flows.

Despite hawkish BoJ guidance at the July meeting, the strategists continue to see December as the more likely timing for the next rate hike. Without forceful US intervention or further hawkish BoJ moves, they expect USD/JPY to push toward 153.00 but maintain a year-end forecast of 159.00.