Former head of Japan's foreign exchange industry: The yen may be undervalued by 20%, and short sellers still need to be wary of intervention risks.
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Market divergence in views on the yen's outlook has intensified, with a former Japanese finance official stating that a reasonable exchange rate should be around 130.
According to BlockBeats, on July 6th, as the USD/JPY exchange rate returned to around 162, market opinions on the yen's future trajectory became clearly divided. Tatsuo Yamasaki, former Vice Minister of Finance for International Affairs at the Ministry of Finance of Japan, stated that the current yen exchange rate has significantly deviated from a reasonable level, and a level around 130 yen to the dollar would be more in line with fundamentals. He added that he "would not be surprised" if the yen rose to that level. Meanwhile, some market participants held the opposite view. Jesper Koll, Executive Director of Monex Group, and Calvin Yeoh, an analyst at Blue Edge Advisors, believe that if the Bank of Japan continues to lag behind in the normalization of monetary policy, the USD/JPY exchange rate could even rise to 200 or higher. Yamasaki also warned that the Japanese government's recent lack of intervention in the foreign exchange market should not be interpreted as a lack of willingness to act. He stated that the Japanese Ministry of Finance has issued multiple warnings and demonstrated its willingness to intervene, and yen short positions still face the risk of being forced to close out. Market participants expect the Japanese government may still intervene in the exchange rate in mid-July.
ING Bank: Japan may have intervened in the yen exchange rate
According to Odaily Odaily, ING analyst Francisco Pesole pointed out that Japanese authorities may have intervened in the yen's exchange rate on Thursday and may take further action on Friday amid tightening liquidity due to the US holiday. He stated that the dollar/yen exchange rate fell in early trading on Thursday, even before weak US non-farm payroll data pushed it below 161.00. "We cannot rule out that this initial decline was driven by foreign exchange intervention." He stated that despite the yen's recovery, further intervention remains a risk. Japan tends to intervene around holidays and spread out over multiple days. He noted that taking action after the dollar is adversely affected by events also aligns with Japan's 2024 strategy. (Jinshi)
DBS: Japan may be adopting a new foreign exchange intervention strategy.
According to a commentary by Philip Wee, Senior FX Strategist at Odaily Group Research, Japan may be adopting a new foreign exchange intervention strategy. Rumors suggest that the Japanese Ministry of Finance may be shifting towards covert, undisclosed currency intervention. Wee stated that such intervention could exacerbate market volatility today, given the thin liquidity in US bond and stock markets due to the Independence Day holiday. He also noted that Japan's new strategy appears to be aimed at shifting market sentiment from skepticism to caution. (Jinshi)
Japan's Finance Minister reiterated that the government will respond appropriately to the yen's exchange rate.
Odaily Odaily reports that Japanese Finance Minister Satsuki Katayama stated on Friday that she would not comment on specific foreign exchange levels, but that the government is prepared to take appropriate measures to address currency fluctuations. At a regular press conference, Katayama also emphasized that the Japanese government has maintained close contact with US authorities regarding foreign exchange issues. Regarding the rising yields on Japanese government bonds, she stated that efforts will be made to implement fiscal policies to gain market confidence. Specific monetary policy decisions will be made by the Bank of Japan. It is expected that the Bank of Japan will maintain close communication with the government and will adopt appropriate monetary policy to stabilize and achieve its price target. Regarding the Bank of Japan's economic blueprint, she stated that there are currently no new developments. (Jinshi)
The yen surged unexpectedly, leading to market speculation that Japan's strategy has shifted towards a "surprise attack" approach.
Odaily Odaily reports that the yen suddenly jumped against the dollar on Thursday, with traders on high alert for possible intervention by Japanese authorities to support the currency. It remains unclear what triggered this market volatility or whether Japanese authorities intervened. The magnitude of the movement appears smaller than in previous interventions. Hirofumi Suzuki, chief foreign exchange strategist at Sumitomo Mitsui Banking Corporation, said, "It's unclear at this point whether this constitutes intervention. However, as reported, the authorities may have shifted their intervention strategy and tactics, and may no longer issue intervention signals in advance, which could make further weakening of the yen more difficult." (Jinshi)
The US dollar fell briefly against the Japanese yen, touching 161.13.
According to Mars Finance, on July 2nd, the USD/JPY exchange rate briefly fell by over 100 points, hitting a low of 161.13, before rebounding and currently trading at 161.7. Previously, Toshihiro Nagahama, a private member of the Council on Economic and Fiscal Policy, stated that the Bank of Japan should continue raising interest rates at a moderate pace, as this is crucial to correcting the excessive depreciation of the yen. He believes the Bank of Japan should raise rates every six months, a pace that would not harm domestic investment. He predicts the Bank of Japan will raise rates at the end of this year, then again next summer, after which it will pause rate hikes. He added, "I personally think a June rate hike is appropriate because delaying rate hikes would lead to excessive yen depreciation, harming households."