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Analyst: If CPI Data Boosts USD, Japanese Authorities May Be Forced to Support JPY
Summary: According to sources, market analyst Jeremy Boulton stated that if the US inflation data released on Tuesday boosts the USD, Japanese authorities may be forced to take action to support the JPY, as they believe the yen has depreciated too much. Since the release of the US employment report last week, market expectations for a ...
According to sources, market analyst Jeremy Boulton stated that if the US inflation data released on Tuesday boosts the USD, Japanese authorities may be forced to take action to support the JPY, as they believe the yen has depreciated too much. Since the release of the US employment report last week, market expectations for a Fed rate cut have diminished, with only a 25 basis point cut expected, and the potential terminal rate for this easing cycle has increased from 3.0% to 3.25%.
If December inflation data exceeds the economists' forecast of a 2.7% year-on-year increase (estimated range of 2.5% to 2.9%), this will further strengthen market expectations. Ironically, there are almost no speculative positions in the market currently (JPY net positions around $200 million), and exchange rate volatility has significantly decreased over the past year.
If Japan intervenes at this time, it may create rather than suppress volatility. However, given the history of large-scale interventions in similar situations in the past, any further data that boosts the USD could trigger a new round of intervention actions.
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Link: Analyst: If CPI Data Boosts USD, Japanese Authorities May Be Forced to Support JPY [Copy]
