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May 16 - 10:55 AM

SocGen: The Fight Against Excessive JPY Weakness Not Over Yet

By eFXdata  —  May 16 - 09:30 AM

Synopsis:

Société Générale highlights the ongoing struggle by Japanese authorities to combat excessive weakness in the yen, despite recent interventions and market fluctuations influenced by US economic data. The commentary underscores the speculative pressure on the JPY and the potential need for continued intervention.

Key Points:

  • US CPI Data Reaction: Recent US CPI data has led to volatile and non-trending market conditions, which pose challenges in interpreting short-term data impacts accurately.
  • JPY Performance: Among G10 currencies, the yen, along with the Canadian dollar, has underperformed against the US dollar since early April. This underperformance is despite the Bank of Japan's intervention efforts and a recent dip in US yields.
  • Market Speculation: The speculative community remains heavily positioned against the JPY, indicating that the recent corrective actions by Japanese authorities have not fully deterred bets on further yen weakness.

Conclusion:

SocGen warns that the fight against the yen's depreciation is far from over, with potential for ongoing volatility and the necessity for additional interventions by the Ministry of Finance and the Bank of Japan. Investors should be cautious, as the environment suggests that despite interventions, significant challenges remain in stabilizing the JPY, particularly if US yields continue to fluctuate widely.

Source:
Société Générale Research/Market Commentary

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