The Japanese yen has crossed the 145 mark against the US dollar, a level not seen since November 2022. This follows a brief touch on the same level on the preceding Friday. The yen’s recent trend of weakening can be attributed to the Bank of Japan’s adjustment of its yield curve control policy in late July, leading to a rise in 10-year Japanese government bond yields to their highest level in nine years.
HSBC, in a forex analysis note, anticipates that the Japanese Ministry of Finance may begin to intervene in the 145-148 range to stabilize the yen’s value. Such intervention occurred in September 2022 when the government and the Bank of Japan bought yen at the 145-to-the-dollar mark.
However, HSBC points out that without such intervention, short positions on the yen might increase further. These positions had already been cut by over 30% in July, especially in the lead-up to the Bank of Japan’s monetary policy meeting on July 28.
The US dollar has also been experiencing an upward trend since late July, with the dollar index rising from a low of 99.77 on July 13 to around 102.99 at present. HSBC highlights a new factor supporting the dollar—the higher yields on longer-end US Treasuries due to concerns about the US budget deficit and Treasury supply.
Upcoming data releases from Japan, including the gross domestic product (GDP) numbers for the second quarter and inflation figures for July, could have an impact on the yen’s trajectory. Any data misses could strengthen the bearish sentiment. The GDP is expected to grow by 0.8% on a quarter-on-quarter basis, while the core consumer price index (which excludes fresh food prices) is forecasted to reach 3.1%, according to a Reuters poll.Top of Form.
