Treasury Secretary's Comments Stoke Intervention Fears for Japanese Yen

The US Treasury Secretary's recent comments have sparked concerns about potential intervention in the foreign exchange market. Michael Pfister from Commerzbank notes that these statements are intended to deter speculative positioning for further Japanese Yen (JPY) weakness.

Pfister highlights that an interest rate hike next week is now fully priced, with tightening of 90 basis points expected by the middle of next year. However, officials may accelerate the pace at which they raise interest rates, but this will not necessarily commit to a rapid pace.

The US Treasury Secretary's claim to have 'asymmetric information' about the Bank of Japan's (BoJ) next moves is seen as an attempt to deter market participants from betting against the JPY. Pfister warns that high expectations surrounding the BoJ limit the potential for a stronger yen until actual interest rate rises materialise.