Yen Giveback Reverses Half of Record Intervention

The largest Japanese Yen intervention on record saw nearly half of the engineered move reversed in just seven trading sessions. On August 11, USD/JPY traded near 159.50, effectively unchanged within a 47-pip range, with the 200-day moving average at around 158.00 and the declining 50-day near 160.50.

The operation, which took place on July 30-31, bought nearly nine Yen of engineered move using 13.75 trillion Yen in two sessions. However, the market has taken back better than four of those nine Yen, putting the pair above its 200-day moving average and within striking distance of the 160.00 handle.

The intervention did not change the reason to sell the Japanese Yen, which remains a policy rate at 1.00% against an American upper bound of 3.75%. The Bank of Japan left settings alone in the same week as the operation, and futures put the odds of its next increase a shade over even.

The domestic case for closing the differential is not obviously strengthening either. Japanese household spending fell 3.3% in June against expectations of a 1% gain, and the tightening path is complicated further by political pressure on the central bank to keep supporting the government bond market.