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 |
|---|---|---|
BNP Paribas | Bearish | 1.1500 |
UBS | Bullish | 1.1800 |
UOB | Bullish | 1.1800 |
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
Related speeches
4 itemsYen: Why Bessent backs himself for successful intervention
The desk's thesis is that US Treasury Secretary Scott Bessent's recent intervention in the FX market signals a bullish outlook for the yen, which is considered significantly undervalued. Per the full note by Chris Turner, Bessent's faith in the yen is partly based on the potential for supportive monetary policy shifts in Japan as well as the historical context of successful interventions. Current consensus sees the yen at 160.47, with a broad expectation of revaluation as firms project targets ranging from 145.00 to 161.71 for March 2026 across the market. Watch USD/JPY dynamics closely for any further indications of strength following the intervention, as this could pivot market sentiment dramatically.
US dollar upside risks – the Fed, BoJ & BoE
The desk sees potential upside risks for the US dollar, driven primarily by the recent Federal Reserve rate hike and changes in monetary policy by Japan's Bank of Japan (BoJ) and the UK's Bank of England (BoE). As per the full note from MUFG EMEA, they suggest that the US dollar's strength might persist amid these central bank actions, which could pressure the USD/JPY pair following the BoJ's tightening measures. Current market consensus for JPY suggests a median target of 152.0 by December 2026, reflecting varied expectations from different firms, with prominent forecasts ranging widely from 140.0 to 165.5, indicating uncertainty in future exchange rate movements.