The exchange rate of the yen against the US dollar hovers near a critical level, and the risk of Japanese authorities' intervention has once again become the focus of attention

The Zhitong Finance App learned that as investors prepare for the exchange rate of the yen to the US dollar falling back to the level of 1 US dollar to 150 yen or even lower, the risk of the Japanese authorities' intervention is once again the focus of attention.

After weakening for two consecutive weeks, the yen once fell to 149.98 yen per dollar on Monday. According to the data, the exchange rate of the yen against the US dollar fell by about 4.4% in the week ending October 5, the biggest weekly decline since December 2009. The prospect of a further depreciation of the yen prompted strategists to warn that the risk of intervention by the Japanese authorities around 150 yen per dollar (the 200-day moving average is 151.25 yen per dollar) increases.

The recent warning issued by Japanese officials means that the market currently believes that the interest rate spread between the US and Japan will not narrow as fast as previously anticipated. Japan's new prime minister, Shigeru Ishiwari, made remarks earlier this month that “the Japanese economy is not ready to accept another rate hike from the Bank of Japan,” which allayed market concerns about the Bank of Japan's interest rate hike and caused the yen to fall rapidly. Meanwhile, Federal Reserve Governor Waller said on Monday that the Federal Reserve should be careful to cut interest rates.

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

In July of this year, when the exchange rate of the Japanese yen against the US dollar fell to a 38-year low, the Japanese authorities intervened. After that, the exchange rate of yen against the US dollar rebounded sharply from 161.95 yen per dollar hit in early July to 149.98 yen per dollar at the end of July.

According to data from the US Commodity Futures Trading Commission (CFTC), as of October 8, leveraged funds' net long positions in yen declined for the second week in a row, indicating that they are less optimistic about the yen. Keiichi Iguchi, senior strategist at Resona Holdings, said that if expectations for the Fed's interest rate cut are revised, the yen may still face selling pressure.

However, some strategists believe that the Japanese authorities still have a long way to go before deciding to intervene again. Eiichiro Miura, head of the strategic investment department at Nissay Asset Management, said, “Unless the yen falls below the dollar to 160 yen, [the Japanese authorities] will not intervene.”