Japanese Yen: Intervention risk may revive tactical longs - BNY
BNY’s Geoff Yu says JPY selling has largely run its course, while USD/JPY’s return toward 160 keeps intervention risk firmly in focus.
BNY Chief Geoff Yu suggests that JPY selling has largely concluded, with USD/JPY nearing 160 bringing intervention risk to the forefront. Although positioning has not yet decisively turned long for JPY, there is potential for tactical yen buying if markets once again anticipate official intervention. The bank notes that exposures are transitioning rather than reversing.
JPY sales have largely ended, with the market using the stronger JPY to re-engage in carry trades or hedge local exposures. Even with recent headwinds from the July FOMC decision and Treasury buyback, USD/JPY remains at 160, validating short positions. However, JPY sales have ceased. The 160 level seems to act as a hard cap for markets.
While the market is not yet fully long on JPY, a repeat of early July buying could occur. The market remains vigilant of intervention at any point.
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