Japanese Yen: Intervention faces persistent rate gap – HSBC
HSBC Asset Management reviews recent coordinated intervention by Japanese and US authorities to support the Japanese Yen, recalling the sharp carry-trade unwind during the previous episode two years ago.
HSBC Asset Management highlights the recent Japanese Yen intervention by Japanese and US authorities, recalling a similar event two years ago. While the intervention provides short-term support and there are risks of a sudden appreciation due to significant net short positioning, persistent US inflation and cautious Bank of Japan tightening create a rate differential that weighs on the yen's medium-term outlook.
Two years ago, global markets experienced a sharp decline in the Japanese yen after authorities intervened to support the currency and the Bank of Japan signaled a slower tightening path. Currently, while the Bank of Japan is taking some action, the backdrop looks less supportive for a sustained yen recovery compared to 2024. Persistent US inflation and more hawkish Federal Reserve expectations have pushed expectations towards higher US rates, which also negatively impact the yen.
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