USD/JPY Recovery Fails to Spur Further Intervention

The USD/JPY currency pair has recovered roughly half of its losses following the largest coordinated intervention in fifteen years, which occurred on August 1.

The intervention was a joint effort between Japan and the United States, with the Federal Reserve Bank of New York selling euros for yen on behalf of the US Treasury, executed through Goldman Sachs and Morgan Stanley.

Despite the significant action taken by authorities, the market has not priced in further follow-up intervention, and speculators are now testing whether officials have another round available.

The rate differential between Japan's monetary policy and the Federal Reserve's policy remains at 262.5 basis points, with one 25bp hike still priced by year-end.