Traders are on high alert for potential Japanese intervention in the money market during Silver Week following the BOJ meeting on September 18, with the 160 yen per dollar level being watched as a risk point.
On September 3, 2569, at 09.44:3 AM, Bloomberg News reported that investors in the money market are becoming more cautious about the possibility of Japanese authorities intervening in the foreign exchange market again during the upcoming Bank of Japan (BOJ) monetary policy meeting, especially during the three-day holiday following the meeting, when market liquidity is likely to decrease, potentially creating an opportunity for authorities to intervene in the currency market.
The yen strengthened by as much as 0.5% to 157.99 yen per dollar on Thursday, as investors increased their bets that the Bank of Japan (BOJ) might raise interest rates by more than 0.25 percentage points at its next meeting.
The yen surged as much as 1.2% during trading in New York on Wednesday, reflecting market concerns ahead of the Bank of Japan's September 18 meeting, where it is widely anticipated that the central bank will raise interest rates.
Concerns have intensified following April's experience, when Japanese authorities intervened in financial markets during a long holiday period for the first time since 2567.
Investors are therefore beginning to anticipate that Japan may employ a similar strategy again during Silver Week, which begins shortly after the BOJ announces the results of its monetary policy meeting.
Samara Hammoud, a strategist at Commonwealth Bank of Australia, stated that Silver Week adds uncertainty to the yen because market liquidity tends to decrease during holidays.
If the dollar-yen exchange rate rises back to test its pre-intervention highs, particularly if this happens rapidly during or after a BOJ meeting, the risk of further intervention by the authorities will significantly increase.
The yen continues to face pressure from high oil prices and the wide interest rate differential between Japan and the United States, despite Japan spending a record $9.64 billion in the past month to prop up its currency.
Such intervention was also supported by the United States, further reinforcing warnings to speculators not to bet against the yen.
Japanese Finance Minister Satsuki Katayama and U.S. Treasury Secretary Scott Bessent have stated that they are ready to intervene in the markets again without hesitation if necessary.
However, speculative investors are beginning to bet on further yen weakening, with hedge funds gradually increasing their short positions on the yen after previously significantly reducing their bearish bets following official intervention.
This BOJ meeting also carries the risk of creating more market volatility than usual, after Bessent openly increased pressure on Japan to raise interest rates.
This situation puts significant pressure on the BOJ. If the central bank does not raise interest rates as the market expects, it would not only surprise investors but could also cause the yen to depreciate rapidly once again.
Bloomberg strategist Mark Cranfield stated that maintaining the yen's strength after a week filled with Fed and BOJ meetings will be challenging. It may require both a more dovish signal from the Fed and a clear signal from the BOJ that it will continue to raise interest rates.
However, yen investors may still lack confidence in the situation, after several past instances where the market was disappointed by policy signals from BOJ Governor Kazuo Ueda.
Investors also need to watch the U.S. Federal Reserve meeting, which will take place just days before the Bank of Japan (BOJ) meeting. The direction of interest rates in both countries will be a key factor affecting yield spreads and the yen.
Earlier, Federal Reserve Chairman Kevin Warsh stated at the Jackson Hole conference that U.S. inflation has not yet slowed significantly and policymakers need to be confident that inflation is declining; otherwise, the Fed still has more work to do.
Marito Ueda, President of SBI FX Trade , stated that the market is closely monitoring currency intervention ahead of the Fed and BOJ meetings, as well as Japan's long holiday.
He believes that if the yen weakens to the point where the dollar rises back to around 160 yen per dollar, intervention by the Japanese authorities in the market becomes clearly possible.
Reference: www.bloomberg.com
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