USD/JPY Tapped at 160: Intervention Risk Remains High

Japanese Yen intervention risk remains high as USD/JPY levels near 160. Geoff Yu from BNY notes that JPY selling has largely run its course, but positioning hasn't yet turned decisively long JPY.

The bank sees scope for tactical yen buying to re-emerge if markets anticipate official intervention again. Intervention risk is capping USD/JPY levels at around 160, validating JPY shorts and USD/JPY longs.

After the initial round of intervention in July, heavy sales ceased on the dollar leg, with investors using the opportunity to either re-engage in carry trades or hedge local exposures. Even recent market headwinds from the FOMC decision and Treasury buyback announcement didn't alter the path.

The 160 level appears to be a hard cap for markets, with the IMF rules around intervention not fully influencing the market yet.