Synopsis:

Credit Agricole discusses the recent movements in the USD/JPY exchange rate, suggesting that Japan's Ministry of Finance (MoF) likely intervened to support the yen as it approached a crucial level of 160. The intervention, believed to have occurred during a Japanese public holiday, temporarily curtailed the yen's decline.

Key Points:

• Recent Yen Movements: USD/JPY surged past 160 before experiencing a sharp drop below 155, following potential intervention efforts by Japan's Ministry of Finance. The exact details of these actions remain unconfirmed until the MoF's official report at the end of May.

• Intervention Context: The intervention likely took advantage of low liquidity due to a public holiday in Japan. The level of 160 is seen as a significant psychological and technical threshold, prompting the MoF to act to prevent further escalation toward this mark.

• Masato Kanda's Comments: Masato Kanda, Japan's Vice Minister of Finance for International Affairs, emphasized the readiness to act around the clock in FX markets but did not specify target levels for intervention.

• Intervention Firepower: According to Credit Agricole, the MoF possesses about USD 160 billion in liquid reserves for potential interventions, with historical data showing around USD 60 billion used in similar actions in late 2022.

• Upcoming Public Holiday and Global Events: Another public holiday in Japan this Friday and the forthcoming Labour Day may influence market liquidity. Additionally, the upcoming FOMC meeting in the U.S. might further affect market dynamics, particularly if Fed Chair Jerome Powell's remarks do not align strongly with current market expectations for future rate cuts.

Conclusion:

Credit Agricole suggests that recent yen stabilization efforts by Japan's MoF have only temporarily slowed the yen's decline against the dollar. The situation remains fluid, with upcoming holidays and global economic events likely to influence currency market volatility. I