Watching for Intervention As U.S. Dollar Falls Toward Five-Month Lows Versus Yen

(This is an excerpt from an article I originally published on Seeking Alpha on July 23, 2012. Click here to read the entire piece.)

Japanese Finance Minister Jun Azumi has formed a habit of warning currency markets about the strength in the Japanese yen (FXY). For example, on May 31st, with USD/JPY slightly above 78 and at 3 1/2 month lows, Bloomberg reported the following warning from Azumi:

{snip}

The Japanese yen hit a bottom against the U.S. dollar the next day. Unfortunately for Azumi, just six weeks later these levels are getting retested. {snip}


If the U.S. dollar breaks recent lows versus the yen, it could quickly retest historic lows without intervention
If the U.S. dollar breaks recent lows versus the yen, it could quickly retest historic lows without intervention

Almost on cue, Azumi issued another warning about the yen’s strength last Tuesday, July 17th: {snip} However, this time, almost a week later, the yen has continued to gain against all major currencies.

Moreover, it is not so easy to claim that the yen is gaining from safe-haven buying. {snip}


While the yen has gained on the U.S. dollar, the Australian dollar has gained on the yen
While the yen has gained on the U.S. dollar, the Australian dollar has gained on the yen

Source: FreeStockCharts.com

The Australian dollar’s rise against the yen has stalled out for much of this month. Perhaps the resumption of a downtrend in this currency pair could signal an imminent move to intervene on behalf of the yen.

{snip}

All things considered, I do not expect the yen to spend much time below 78 with the USD/JPY pair. {snip}
Be careful out there!

(This is an excerpt from an article I originally published on Seeking Alpha on July 23, 2012. Click here to read the entire piece.)

Full disclosure: net short Japanese yen, net short Australian dollar

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