ING: Japanese Forex Intervention Possibility Remains High on Holiday Patterns

ING stated on the 6th that the possibility of Japanese foreign exchange authorities' market intervention remains high. The bank explained through a weekend post that Japanese authorities typically intervene during holidays and tend to spread interventions across multiple days. ING noted that the 3rd was a US financial market holiday, and market liquidity is expected to decrease on the 6th as well, following the 3-day holiday period. This assessment comes amid ongoing attention to Bank of Japan monetary policy and recent USD/JPY exchange rate movements around the 161 yen level.

ING Highlights Japanese Authorities' Holiday Intervention Patterns

ING explained that Japanese authorities generally intervene during holidays and tend to distribute interventions across multiple days. The bank noted that the 3rd was a US financial market holiday. While the 6th is not a US financial market holiday, ING stated that trading volume often noticeably decreases in the morning of the first trading day following a 3-day holiday period combining a holiday and weekend, as market participants do not actively establish positions.

USD/JPY Movements and Risk Reversal Index Signal Intervention Likelihood

The bank stated that the USD/JPY exchange rate temporarily fell below the 161 yen level before the US non-farm payroll report announcement on the 2nd, and the possibility that this was due to market intervention cannot be ruled out. ING noted that the one-week risk reversal index for USD/JPY dropped sharply, which suggests that the possibility of intervention occurring soon has increased.

ING Notes BOJ Policy Requirements to Prevent USD/JPY Rebound

ING stated that while weak US employment indicators are creating a favorable environment for the yen in the short term, a more hawkish monetary policy stance from the Bank of Japan is also necessary to prevent the USD/JPY rebound that occurred after the interventions in April and May.

FAQ

What did ING say about Japanese forex intervention on the 6th?

ING stated on the 6th that the possibility of Japanese foreign exchange authorities' market intervention remains high, noting that authorities typically intervene during holidays and spread interventions across multiple days.

Why does ING believe intervention is more likely around the 6th?

ING explained that the 3rd was a US financial market holiday, and market liquidity is expected to decrease on the 6th following the 3-day holiday period, as trading volume typically drops when market participants do not actively establish positions on the first trading day after extended holidays.

What does ING say is needed to prevent USD/JPY rebound?

ING stated that while weak US employment indicators create short-term favorable conditions for the yen, a more hawkish monetary policy stance from the Bank of Japan is necessary to prevent the USD/JPY rebound that occurred after interventions in April and May.