Yen Jumps Against Dollar Amid Intervention Speculation
The Japanese yen experienced a sudden surge against the US dollar on Monday, October 23, 2023. This unexpected movement has traders on high alert, anticipating potential intervention from Japanese authorities to bolster the weakening currency.
The dollar's sharp decline from 160.245 to 156.55 yen has left the cause of this shift unclear. However, traders remain vigilant for any actions from Tokyo to support the yen, which has depreciated by 11% against the dollar this year.
"The extent of the move looks like an intervention, although liquidity is thin so it's still hard to draw any firm conclusions," one trader commented. "The move will still likely be faded, at least partially, with the Fed expected to be hawkish this week and the BOJ narrative completely missing any hawkish hints last week."
Another trader expressed caution, noting the absence of the usual "rate checks" that typically precede an intervention. They suggested that thin liquidity due to the holiday might be exacerbating the downward movement, with few willing to buy the dip in USD/JPY given the potential for intervention.
Despite the uncertainty, speculation regarding intervention by the Ministry of Finance (MOF) is growing. The timing of the yen's rise, coinciding with a Japanese public holiday and lower USD/JPY liquidity, has fueled this speculation.
"The move has all the hallmarks of an actual BoJ intervention and what better time to do it than on a Japanese public holiday which means lower liquidity in USD/JPY and more Bang for the Bank of Japan's buck!" one trader remarked.
While some remain skeptical, the possibility of intervention cannot be dismissed. The end-of-month FX data will ultimately reveal the true source of the yen's sudden jump.