Following remarks by Vice Minister of Finance Mimura (三村), dollar/yen moved toward a stronger yen during New York hours, temporarily falling to the mid-¥156 range. Against the backdrop of the yen exchange rate being discussed at the Japan-US summit, the market has grown more alert to the possibility of intervention.
In today’s FX market, dollar/yen traded in the upper ¥157 range during Tokyo hours, but the yen strengthened as overseas trading began and dollar/yen rapidly fell to around the low ¥156 range. There was also speculation that around ¥156.45 was being watched as a near-term support level.
The catalyst for the decline was the content of an interview with Vice Minister of Finance Mimura (三村), who said the market should take at face value the message that the Japanese and US governments share the view that the yen’s undervaluation is a problem.
Government officials have emphasized that the yen exchange rate was discussed at last week’s Japan-US summit, and the market is reportedly becoming more alert to intervention as the exchange rate approaches ¥160.
Although expectations of a narrowing Japan-US interest-rate differential have receded from current levels, some continue to expect dollar/yen to remain in an uptrend over the medium term. Meanwhile, the Bank of Japan’s rate hike has reduced appetite for yen carry trades, and dollar/yen is said to have potential for a short-term correction.
The NY cut option expiry at 23:00 Japan time is estimated at ¥156.75, with ¥156.75 cited as a trading level.