Japan-United States intervention at the 155th critical test of the yen

On 4 August, following a historic joint intervention between Japan and the United States, the focus of market attention shifted to whether the yen could further appreciate and exceed 155 levels. According to strategists, this price will be a key test for the sustainability of the yen's rebound. Japan's exchange-market intervention in April and May, which had pushed the dollar to fall near 155 yen, was followed by a renewed exchange rate, reinforcing the market's earlier view that official intervention could only take time. As Shusuke Yamada, the chief foreign exchange and interest-rate strategist in Japan, said, “If this time the level cannot be exceeded, the market may think that policymakers have exhausted the tools available.” He indicated that if the United States and Japan continued to fall, the logic of market transactions could change. “In this case, the United States-Japan market structure may shift from `low buy-in' to `high sell'.” The strategist of the Bank of Rich Countries, Chidu Narayanan, said: “Flowing down 155 will increase the risk of the Japanese yen being squeezed, and even if these positions are partially flat, they may lead to a large amount of Japanese yen purchases. The US-Japan exchange rate is likely to return deeper, even down to 152, as the leverage account reduces its exposure and removes the imbalance in position.”