Strategists say the coordinated intervention between Japan and the US increases the risk for anyone betting against the currency. President Donald Trump said the US joined a currency-market intervention that lifted the yen last week as a sign of friendship with Japan.
Read: Japan Confirms First Joint Yen Intervention With US in 15 Years
Here’s what strategists are saying:
Rong Ren Goh, a fixed income portfolio manager at Eastspring Investments:
US participation has clearly strengthened the credibility of official efforts to stabilize the yen, especially amid growing questions over whether increasingly large intervention sums are delivering diminishing market impact.
What remains unclear is the framework for US involvement. Markets still do not know the conditions that would trigger further participation, or whether this was a one-off response to disorderly moves.
More fundamentally, yen weakness reflects persistent concerns over Japan’s monetary and fiscal policy settings. Unless those underlying issues are addressed, intervention alone is unlikely to deliver a sustained reversal.
For positioning, the key change is that potential US involvement introduces greater two-way volatility. The yen may no longer weaken in a steady, predictable fashion, making short JPY positions less straightforward. We remain cautious on the yen, but entry level and position sizing have become more important.
Gerald Gan, chief investment officer at Reed Capital:
I think that the joint intervention will not significantly affect the yen’s strength meaningfully.
Currency interventions are only useful in the short term and I don’t think it will shift market sentiment for too long. Even if Japan and US continue to deliberately support the yen together, it cannot be sustained for too long and its potency will only diminish with more future interventions.
The main fundamental driver on the yen’s meaningful and sustainable appreciation still lies in the BOJ’s actions.
Fabien Yip, market analyst at IG International:
The weak yen has supported Japanese equities this year. While Thursday’s FX intervention did little to derail the equity market’s recovery, the US Treasury‘s action on Friday joining Japan in buying yen adds a fresh source of uncertainty. Nikkei futures point lower into the new week, as investors weigh whether a change in the dollar-yen trend could dent the export-driven rally.
Charu Chanana, chief investment strategist at Saxo Markets:
Coordinated intervention has changed the near-term risk-reward for betting against the yen. History suggests authorities often intervene in clusters rather than one-off operations, particularly if markets quickly retrace the initial move. That doesn’t guarantee another intervention, but it does raise the hurdle for rebuilding aggressive short-yen positions.
US support is significant because it changes intervention from a unilateral Japanese effort into a coordinated policy signal. Markets are much less willing to fight intervention when both governments are aligned.
However, a stronger yen ultimately needs fundamentals to support it. That could come from additional BOJ tightening, lower US yields, or improving confidence in Japan’s fiscal outlook. Without one of those, intervention is likely to slow depreciation rather than permanently reverse it.
I don’t think we’re entering a prolonged bull market for the yen yet. The initial reaction from Japanese equities is likely to be negative. Japan’s equity market has been one of the biggest beneficiaries of yen weakness, so a sharp reversal naturally weighs on exporters and earnings expectations.
Pelham Smithers, founder of equity research firm Pelham Smithers Associates:
Tokyo has inflation jitters again and while no one seems to mind too much that the government is having to support the yen, the risk is this becomes a 1992 UK-style one-way bet for macro funds. Should a government forex intervention be seen to fail, then we could see a real run on the yen, which would only make the inflation outlook even worse.
With assistance from Kana Nishizawa, Mia Glass and Ruth Carson.
This article was generated from an automated news agency feed without modifications to text.
