USD/JPY Unwinds as Suspected MOF Intervention Collides with Dovish Fed Comments
A sudden and significant downturn in the USD/JPY currency pair has been attributed to a combination of suspected intervention from Japan's Ministry of Finance and less hawkish remarks from senior FOMC officials.
The move, which sent the pair back to levels seen around the lows of the intervention episode in late July and early August, was described as 'almost identical' to what was seen before the earlier intervention.
New York Fed President John Williams stated that the case for a September hike 'isn't yet firm', while Governor Christopher Waller said he would support keeping rates unchanged if August inflation data continued to cool.
The correlation between USD/JPY and US Treasury yields has surged, with the five-day relationship with the US 2-year yield rising to 0.87 and the relationship with the US 10-year sitting at an even stronger 0.99.