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Mar 25 - 10:55 AM

USD/JPY: Reference: Scenarios For Verbal Intervention - BofA

By eFXdata  —  Mar 25 - 09:38 AM

Bank of America Global Research discusses the scope of potential BoJ intervention USD/JPY.

"We think verbal intervention is the only readily available tool for the government to contain the yen weakness (if they want) as the Bank of Japan maintained its dovish stance last week with Governor Kuroda emphasizing a weak yen was still net-positive for the economy and the rise in imported inflation was due to the increase in commodity prices, not the FX rate," BofA notes. 

"USD/JPY > 120 (likely close to 125): The MoF could become uncomfortable with the FX volatility or even the level ("sudden movements in exchange rates are undesirable", "exchange rates are (clearly) not reflecting fundamentals" 1).

USD/JPY > 125: The MoF may start warning against intervention ("we can't tolerate speculative moves", "we are ready to take decisive action to counter excessive moves").

USD/JPY>130: Although the threshold is quite uncertain at the moment, actual intervention could become a possibility if USD/JPY exceeds 130. That said, the "reverser currency war" makes coordinated intervention less likely and intervention difficult to justify," BofA adds. 

Source:
BofA Global Research

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