Yen Weakens, Japanese Intervention Potentially Curbs USD/JPY Gains
USD/JPY strengthened to around 157.15 in early European trading on Monday (May 11th), as the dollar strengthened amid growing concerns about the Middle East conflict, driving flows into safe haven assets. At the same time, the yen weakened, prompting the market to weigh the balance between global dollar strength and the risk of a policy response from Japan.
Regional tensions escalated after US President Donald Trump rejected Iran's latest peace proposal. Reports stated that the proposal included a cessation of hostilities on multiple fronts, an end to the US naval blockade, and a guarantee of no further attacks on Iran. These developments contributed to rising oil prices and added pressure on the currencies of energy-importing countries.
However, the USD/JPY's upside is considered limited by renewed threats of intervention from Japanese authorities. Japanese officials reportedly intervened again during Golden Week, with an estimated cost of around ¥4 trillion to ¥5 trillion (approximately $32 billion), emphasizing that the government remains prepared to act if yen volatility is deemed excessive.
Japan's top foreign exchange official, Atsushi Mimura, stated last week that intervention remains a possibility, adding that IMF rules do not limit the frequency of interventions. This message keeps the "risk premium" for intervention high, especially as USD/JPY approaches psychologically sensitive areas.
Some market participants believe the risk of intervention and official warnings make chasing yen weakness less attractive as the pair approaches 160, although structural pressures still limit the chances of sustained yen appreciation. Market focus will now be on the dynamics of Middle East tensions, oil price movements, and the intensity of signals and actions from Japanese authorities as USD/JPY approaches previous levels. (asd)
Source: Newsmaker.id
