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.
What the desk is arguing
The desk posits that the joint intervention by the US and Japan might momentarily stabilize the yen, but it is unlikely to maintain a sustained impact on USD/JPY, especially given the current market perception surrounding Fed rate hikes. Per the full note, as the market digests this intervention, the broader dollar could remain underpinned until the outcomes of this week’s US jobs data, specifically the Non-Farm Payrolls report, are released.
Trading metrics signal that many participants are still betting on Fed tightening, as indicated by a rebound in rate hike expectations subsequent to Chair Kevin Warsh’s remarks last week. Currently, the market discounts nearly 16-17 bps of a potential Fed hike, reflecting a shift back to a somewhat hawkish outlook despite the intervention measures.
Where it sits in our coverage
Our internal consensus for USD/JPY is currently pegged at 150.0, with a range from 140.0 to 161.7. Specific firm perspectives include deutschebank with a Mar-26 target of 153.0, jpmorgan projecting 157.0, and morganstanley at 150.0.
The desk's outlook aligns closely with deutschebank but leans towards the lower end of the spectrum, indicating a more cautious stance on yen appreciation amid ongoing interventions. Notably, the current target appears below the middle ground of estimated firm targets, suggesting a need for validation through data releases.
How other firms see it
Many banks, including morganstanley and deutschebank, are supportive of a relatively weaker USD/JPY, possibly gravitating towards a tighter range as interventions take place. Conversely, rabobank holds a more aggressive position, forecasting a higher rate of 158.1725 for Mar-26, which contradicts more conservative estimates from firms expecting depreciation.
The trajectory of EUR/USD will likely respond to broader dollar narratives as market participants assess potential spillovers from the interventions. Additionally, tracking the yield differentials influenced by ongoing Fed policy is essential for predicting movements within the USD/JPY pairing.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Joint US-Japan intervention seen as a temporary containment exercise rather than a solution.
- 02Dollar stability may persist despite significant supply, hinging on Fed rate hike expectations.
- 03Market is poised for pivotal US jobs data that will influence perceptions of Fed actions this month.
- 04Consensus estimates for USD/JPY reveal a significant range of forecasts across banks, indicating uncertainty.
Market implications
Traders should watch the USD/JPY reaction closely around the forthcoming Non-Farm Payrolls report, expected this week. A poor data print could alter the rate hike narrative and trigger a more pronounced shift in dollar strength.
Risks to this view
The primary risk to this outlook would be unexpectedly strong US jobs data, which could bolster the case for a September rate hike and lead to a stronger dollar, thereby negating the effects of the intervention on yen stability.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
UBS | Bullish | 1.2000 |
TMGM | Neutral | 1.1450 |
Rabobank | Bearish | 1.1400 |
Articles FX Daily: Joint yen intervention is a containment exercise Published 07:46 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The FX week starts with traders bracing for another day of USD/JPY intervention from Japanese and US authorities. Despite a lot of dollars having been supplied to the market over the last three days – perhaps $70-80bn – the broader dollar is holding up quite well. Whether that continues to be the case will be a function of this week's US jobs data Chris Turner , Frantisek Taborsky and Francesco Pesole Joint US-Japan intervention is rare, but we doubt it drives USD/JPY sustainably under 155 USD: Market still buying into a Fed hike In theory, the dollar should be broadly weaker today after the US and Japanese authorities confirmed joint FX intervention (more below) and the Japanese probably sold $70-80bn over the last three days.
Lower oil prices should also be weighing on the dollar on reports from US President Donald Trump that negotiation, rather than military firepower, is Washington's preferred method of engaging with Iran. The fact that the dollar is not broadly weaker probably owes to the unresolved issue of whether the Federal Reserve will hike in September. Having briefly priced less than 10bp of tightening after Chair Kevin Warsh's press conference last week, that pricing has now bounced back to 16-17bp on the view that a failure to hike would lead to a further sell-off in the long end.
Here, US 30-year Treasury yields remain over 5.20% and the 30-year mortgage rate has risen to 6.75%. It seems the only way the Fed can avoid hiking in September is if the US data is poor enough. A major input to that decision comes this week in the form of US jobs data, including JOLTS job openings, ADP, and Friday's non-farm payrolls report.
On NFP, consensus is around +75-80k and probably not quite weak enough to rule out a Fed hike. In other words, the case for a sustained sell-off in the dollar has yet to be made. For today, the focus should be on a reasonably strong July ISM manufacturing release.
The DXY dollar index will be bounced around by the USD/JPY intervention story, but with decreasing marginal impact from this news story, we suspect DXY could find support near 99.35/40 and can break back above 100 this week. Chris Turner EUR: What to make of EUR/JPY intervention? EUR/USD should probably be doing better, buoyed by decent eurozone hard data last week , lower oil prices and lots of dollar selling from Japan.
The fact that it is not may partially be owed to the news that US authorities were checking rates in – and possibly selling – EUR/JPY on Friday. However, we doubt such news will have any lasting impact on the euro. For reference, the US Treasury only has around $13bn of euro-denominated FX reserves to sell ($1.2bn in deposits, $11.7bn in securities), which is barely a drop in the ocean compared to Tokyo's activity in FX markets and the size of global FX flows.
Sources & References
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