The yen quickly fell to the 150 mark, and intervention risks returned to the focus

The risk of yen intervention is once again the focus of investors' attention, as they are prepared to wait for the yen to fall back to 150 or even lower against the US dollar.

After falling for two consecutive weeks, the yen fell to 149.98 on Monday, the worst decline since 2009 in the five days ending October 4. The prospect of a further depreciation of the yen prompted strategists to warn of an increased risk of intervention at the 150 mark or around the 200-day moving average of 151.25.

Recent cautious remarks by Japanese officials mean that the market now does not think that the interest rate spread between the US and Japan will shrink as quickly as previously anticipated. Japan's new prime minister, Shigeru Ishiwari, said that Japan is not ready to raise interest rates, while strong US data has prompted traders to reduce their bets on the US monetary easing policy. Federal Reserve Governor Waller said on Monday that the Federal Reserve should be careful to cut interest rates.

Takuya Kanda, head of research at Gaitame.com Research Institute in Tokyo, said, “The key is whether the yen will fall below 152.” This is a key level for the yen, he said, because after the last time the yen fell below this level, it quickly fell to 160.

When the exchange rate of the yen against the US dollar hit a 38-year low, the Japanese authorities intervened in the market in July. At the beginning of July, the yen fell to 161.95, then rebounded sharply, and returned to 149.98 at the end of July.

According to data compiled by Bloomberg, five yen purchases increased the average value of the Japanese currency by more than 5 yen from 2022 to the first half of this year.

Japan's chief currency officer Jun Mimura said earlier this month that he is closely monitoring developments in the foreign exchange market, including speculative trends. Japan's new finance minister, Katsunobu Kato, also warned that sudden fluctuations in the yen would have a negative impact on businesses and households.

However, the opinions of strategists are still divided, and some believe that there is still a long way to go before the authorities decide to return to the market.

Eiichiro Miura, head of the strategic investment department at Nissay Asset Management Corp. (Nissay Asset Management Corp.), said, “We will not intervene unless the yen depreciates by more than 160.”

According to data from the US Commodity Futures Trading Commission (CFTC) as of October 8, leveraged funds' net long positions in yen fell for the second week in a row, indicating that their bullish sentiment has weakened.

Even so, Keiichi Iguchi, a senior strategist at Resona Holdings Inc., said that if expectations of US interest rate cuts are revised, the yen will face selling pressure. “If the yen continues to weaken, we need to intervene carefully,” he said.