FX Daily: Bessent provides more rationale for yen intervention
At a Glance
The desk is highlighting an increased likelihood for further intervention in the yen market, driven by recent commentary from US Treasury Secretary Scott Bessent regarding the robustness of the Japanese currency. Per the full note, the dollar's strength is being supported by uncertainty around Federal Reserve policy and a resilient US economy despite a risk-on market environment. As the DXY trades close to 100, our outlook for USD/JPY remains influenced by geopolitical dynamics, financial market trends, and upcoming economic data releases. Notably, the consensus target for USD/JPY remains relatively weak, currently forecast at 150.0 by multiple firms.
Key Takeaways
Full Analysis
What the desk is arguing
The desk posits that the likelihood of further intervention to support the yen is increasing, particularly following insights from Bessent. The recent risk-on sentiment has typically favoured a weaker dollar, yet fears of Fed tightening keep the DXY elevated, suggesting that the intervention is a protective measure against excessive yen depreciation.
Supporting this narrative, the dollar is trading resiliently around 100, reflecting concerns about inflation and potential Fed hikes amid lower oil prices. This scenario creates a challenging environment for yen holders as market dynamics shift, emphasizing the need for monitoring price movement closely.
Where it sits in our coverage
The current consensus target for USD/JPY is 150.00 by December 2026, with a range from 143.00 to 161.71. Notable firm targets include: - deutschebank: Dec26 target 143.0000 - morganstanley: Dec26 target 140.0000 - bofa: Dec26 target 147.0000
Our perspective aligns with this mid-range expectation, given that firms like bofa and deutschebank suggest similar bearish outlooks for the yen.
How other firms see it
Many firms share a bearish view on the yen with a consensus indicating a weak trajectory. However, firms like uob project a significantly higher dollar-yen rate for March 2026, suggesting a divide in market expectations.
The current positioning in the FX market could be influenced by upcoming macroeconomic indicators, particularly relating to the US jobs data that may impact Fed decisions and subsequently, the USD/JPY movement.
Market Implications
Investors should monitor the USD/JPY pair closely, particularly if it approaches key technical levels such as 157.00. With upcoming economic data including U.S. job market reports on the near horizon, volatility may arise as traders reposition ahead of potential Fed guidance.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Bank of America | Bearish | 1.1200 |
ANZ | Bearish | 1.1400 |
UOB | Bullish | 1.1565 |
From the original
Articles FX Daily: Bessent provides more rationale for yen intervention Published 07:30 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Expectations of another ceasefire in the Gulf and lower oil prices have seen market rates drop and equities rall
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The desk interprets current market dynamics as a reaction to recent dovish signals from the Federal Reserve and active JPY intervention, contributing to a significant drop in the DXY index. As highlighted in the note from ing-think, the dovish tones from Fed Chair Kevin Warsh and recent weak economic data precipitated a selloff, with the DXY index dipping back below the 100.0 mark. This comes as positioning in the USD is increasingly stretched, suggesting potential for further long-squeezing. Concurrently, concerns around JPY intervention have added to the pressure on the dollar. The upcoming Eurozone CPI data may further influence sentiment. Overall, while we might see stabilization, the desk remains cautious about signaling a bottom in this dollar weakness.
FX Daily: Joint yen intervention is a containment exercise
The desk views the recent joint intervention by Japanese and US authorities as primarily a containment exercise designed to stabilize the USD/JPY pair without enabling a sustained sell-off of the dollar. Per the full note from ing-think, despite significant dollar supply—estimated between $70-80 billion—the dollar remains relatively stable, which raises questions about the market's expectations for the Federal Reserve's September policy meeting. The upcoming US jobs data is poised to influence this outlook, as traders anticipate that weak data could challenge the recent uptick in rate hike expectations, which currently price in around 16-17 basis points of tightening.