Uncertainty over Japan-U.S. monetary policy and supply-demand factors unsettled the yen, shifting it into a range around ¥154 rather than around ¥118. The market is pricing in volatility above the level seen after the intervention.
In the New York foreign exchange market on 8 September, the yen traded in a range around ¥154 to the dollar. In Tokyo, yen appreciation and dollar depreciation briefly pushed the exchange rate to around ¥152.89, but the move subsequently lost momentum. The unwinding of speculative yen-selling positions was cited as a supply-demand factor, while uncertainty over the direction of Japan-U.S. monetary policy continued to make market movements difficult to predict.
It was noted that the implied volatility of the yen exchange rate priced into the market was above the level seen after the coordinated Japan-U.S. intervention at the end of July. Depending on whether the price movements following the intervention are repeated and on the direction of policy going forward, the possibility of sharp short-term swings is being watched closely.
The yen exchange-rate implied-volatility indicator published by the U.K.’s LSEG remained at a high level on this day, and investors are closely monitoring the direction of Japan-U.S. monetary policy and the market’s supply-demand balance.