Yen Surges to Highest Level Since February, Breaking Key Support Level
The yen has surged to its highest level since February, breaking through the peak previously established by joint Japan-U.S. intervention efforts. The USD/JPY exchange rate fell below the key support level of 155, triggering a cascade of stop-loss orders and forcing option market makers to sell dollars, accelerating the yen's appreciation.
Bank of Japan Policy Board member Hajime Takada hinted at consecutive interest rate hikes, further bolstering expectations for a rate hike. The Government Pension Investment Fund's potential asset reallocation has also provided support for the yen. Several strategists believe that this rally is more endogenous and sustainable than previous moves driven by intervention.
Traders attribute low liquidity due to U.S. public holidays to price volatility, while others point to the breakdown of the 155 level as a significant technical factor. The breach of this level has triggered stop-loss orders and forced option market makers to sell dollars, amplifying the yen's gains.
Masahiko Loo, Senior Fixed Income Strategist at State Street Global Advisors, noted that the yen's break below 155 is significant because this level had previously served as a support floor following past interventions. Motonari Sakai, Chief Manager of Foreign Exchange and Financial Products Trading at MUFG Trust Bank, stated that market volatility tends to intensify during the New York market holiday.
According to Bloomberg, citing a trader familiar with the situation, a large volume of stop-loss orders below 155 were triggered, forcing option market makers to follow suit in selling U.S. dollars. Sakai also provided technical target levels for USD/JPY, including a primary downside target near the February low of 154 yen.