FX Daily: Bessent provides more rationale for yen intervention
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.
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.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Potential for further yen intervention increases based on latest commentary.
- 02DXY remains firm around 100 due to Fed policy uncertainty.
- 03Market sentiment is risk-on, but dollar resilience complicates typical outcomes.
- 04Current consensus for USD/JPY remains weak, aligned with bearish forecasts.
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.
Risks to this view
A significant turnaround in sentiment could occur if the Federal Reserve signals a more dovish stance ahead of upcoming economic data. Additionally, any unexpected geopolitical developments in the Gulf region could undermine the rationale for yen support.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
UOB | Bullish | 1.1565 |
Bank of America | Bearish | 1.1200 |
UBS | Bullish | 1.2000 |
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 rally. A risk-on environment would normally see the dollar come lower, but uncertainty about Fed policy and a healthy US economy are keeping the dollar supported. US Treasury Secretary Scott Bessent has provided more colour on FX intervention Chris Turner , Frantisek Taborsky and Francesco Pesole US Treasury Secretary Scott Bessent has shed more light on the recent joint intervention to support the yen USD: Dollar is holding up quite well Financial markets are experiencing one of their periodic pro-risk turns.
Reports suggest a new US-Iran ceasefire deal could be announced today, allowing traffic to transit the Strait of Hormuz for 60 days without a fee. Oil prices have been trading off that story all week, bringing Brent below $80/bl and delivering lower market interest rates and higher equity prices around the world. The above dynamic would normally be associated with a weaker dollar, as investors put money to work outside the US.
But that's not quite the case. DXY dollar index continues to trade near 100, which probably owes to lingering fears that the Fed might still hike on 16 September. Lower oil prices and perhaps some slightly softer JOLTS jobs data have seen pricing for that Fed move drop to +14bp from +16/17bp at the start of the week.
While Friday's US July jobs report is still the biggest macro driver this week, there will still be focus on today's ISM services release and the monthly ADP numbers. Regional surveys suggest the former should remain strong and an ADP release near consensus of +65k looks unlikely to hit the dollar too hard. Overall, we can probably see DXY trading in a tight 99.50-100.00 trading range today.
Elsewhere, Treasury Secretary Scott Bessent yesterday provided some colour to the recent participation in joint intervention on the yen. One of his points, which we did not cover in our review , was that yen weakness could trigger competitive devaluations in the region. This harks back to some of the hot topics in last year's Mar-a-Lago accord discussions, where undervalued Asian currencies were blamed for the hollowing out of the US manufacturing sector.
His comments also seemed to imply a quid pro quo had been made with the Bank of Japan, where, in exchange for intervention, the BoJ would hike earlier than expected in September. Chances of an earlier BoJ hike have been marked sharply higher this week. USD/JPY may well have put in a significant top at 164, but cementing it will require both faster BoJ tightening and the Fed avoiding a hike.
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