Following the weakness of the US employment report at the end of last week, USD/JPY rebounded after plunging, and the IMF's definition and the number of interventions are expected to be the focus of the yen market from next week onward.
In overseas markets at the end of last week, USD/JPY plunged temporarily to ¥156.68 after it became clear that July's US nonfarm payrolls had fallen more than expected and that the figures for the previous 2 months had also been revised downward. Selling then ran its course and buybacks prevailed, with the pair narrowing its losses to around ¥157.99 shortly after midnight.
In today's Tokyo market, USD/JPY is likely to fluctuate on developments and reports concerning whether peace talks between the United States and Iran are taking place, while markets remain alert to yen-buying intervention by Japan's foreign-exchange authorities. Movements in US long-term interest rates are likely to influence the market.
Yen-buying intervention was conducted on 3 consecutive business days last week, sending USD/JPY temporarily down to ¥155.23. Some believe the impact of the intervention did not last as long as before, and the number and timing of future interventions will remain in focus.
The focus is on how Japan's intervention complies with the IMF's definition when the IMF classifies countries' exchange-rate regimes as freely floating. In addition to the definition of intervention on 3 consecutive business days, the application of the criterion of 3 interventions in a 6-month period is also at issue. The market will be assessing the implications of designating an intervention early as the third series, as well as whether and when the next intervention can be conducted.