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May 30 - 10:55 AM

Credit Agricole: All Eyes on Japan's FX Intervention Report aon Friday; Implications for JPY

By eFXdata  —  May 30 - 09:35 AM

Synopsis:

Credit Agricole provides insights into upcoming events that could impact the Japanese yen (JPY), particularly the Ministry of Finance’s (MoF) monthly FX Intervention Operations report due this Friday. The focus is also on the potential effects of recent and possible future Bank of Japan (BoJ) activities on JPY valuation.

Key Points:

  • BoJ Rate Outlook: BoJ Governor Kazuo Ueda’s willingness to raise rates if inflation trends and expectations solidify around 2% underscores the central bank’s stance on inflation control. Tokyo CPI data, expected to bounce back in May, will be pivotal.
  • JGB Purchases and Yield Movements: The BoJ’s ongoing adjustments in its JGB purchase strategy, which recently saw a reduction in the 5-10Y segment, has driven 10Y JGB yields to a 12-year high, lending some support to the JPY.
  • MoF FX Intervention Report: Due to be released at 11:00 BST on Friday, this report is expected to confirm interventions on April 29 and May 1 aimed at supporting the JPY. Insights into the amount spent on these interventions will be crucial, as significant spending could pressure the JPY by indicating a rapid depletion of liquid reserves.

Conclusion:

The upcoming MoF report and other central bank activities are critical for JPY's short-term outlook. While the confirmation of past interventions might not surprise the market, details on the extent of reserve usage could influence JPY movements. Investors and traders should watch for these releases to gauge potential shifts in JPY dynamics, especially in relation to ongoing and future central bank actions.

Source:
Crédit Agricole Research/Market Commentary

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