Yen Strengthens, Will Japan Intervene?
The Japanese yen strengthened in the Asian session on Tuesday, moving away from its two-week low against the US dollar, with USD/JPY hovering around 152.8 per dollar. This strengthening came after Japanese Economy Minister Minoru Kiuchi signaled that the government was ready to monitor and, if necessary, intervene to halt the yen's rapid weakening. These comments prompted market participants to quickly reduce their short positions in the yen ahead of this week's two major events: the FOMC (Fed) meeting starting today and the Bank of Japan (BoJ) decision on Thursday.
From a fundamental perspective, the market is also beginning to see changes in Japan itself. Recent data showed that Japanese service sector inflation rose for the second consecutive month in September. This reinforces the view that the BoJ may finally begin gradually raising interest rates after years of ultra-loose policy. Furthermore, the market is almost entirely convinced that the Fed will cut rates twice more before the end of the year, easing pressure on the yen. This factor, combined with uncertainty about the outcome of US-China trade negotiations, provides additional support for the yen. However, the yen's room for strengthening remains limited as investors know that new Prime Minister Sanae Takaichi wants to push for substantial fiscal spending, which could keep the BoJ cautious.
Source: Newsmaker.id
