USD/JPY Reversal Sparks Intervention Fears Ahead of Key Payrolls Report
The USD/JPY currency pair saw a sharp reversal last week due to coordinated intervention by Japanese authorities and possibly South Korean authorities, along with the US Treasury. The move came after months of threats by Japan's Ministry of Finance, which finally culminated in an apparent coordinated effort.
Japanese authorities' willingness to intervene is remarkable, given there is no financial crisis or severe market dysfunction. Instead, it reflects relative monetary policy, where the BOJ has chosen to leave rates unchanged despite inflation and stronger-than-expected economic data.
The BOJ's decision not to raise interest rates has forced fiscal authorities to intervene rather than use monetary policy to support the yen. With a three-business-day window for intervention under IMF guidelines, there is an elevated risk of further intervention on Monday if USD/JPY stages another significant bounce.