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Apr 25 - 02:55 PM

SocGen: USD/JPY Will Likely Test the Willingness of the MoF to Intervene on a Large Scale

By eFXdata  —  Apr 25 - 01:30 PM


Société Générale assesses the potential for USD/JPY to test the Japanese Ministry of Finance's (MoF) intervention limits due to persistent US rate expectations and recent market dynamics. The bank highlights upcoming US economic data as critical to future currency movements.

Key Points:

  • US Yield Curve Dynamics: The correlation between Fed funds futures and 10-year yields is notably high, reflecting a flat yield curve. This correlation significantly influences the USD/JPY exchange rate, with current US rate expectations supporting continued yen weakening.

  • Potential for Yen Intervention: Given the strong correlation and current trends in US rate expectations, SocGen suggests that USD/JPY may soon test the MoF's willingness to intervene significantly in the currency market to support the yen.

  • Impact of US Economic Data: The recent market response to US PMI data indicates that positions in long dollar and short Treasury trades might be becoming overstretched. This situation sets the stage for next week’s US ISM and payroll data, which are expected to be crucial in determining short-term directions for USD/JPY.

  • BoJ Meeting Expectations: While the upcoming Bank of Japan (BoJ) meeting is not anticipated to bring significant surprises, it remains a variable that could influence yen dynamics. Any unexpected shifts or statements from the BoJ could impact market expectations and potentially affect USD/JPY trends.


SocGen emphasizes the importance of upcoming US economic indicators in shaping market expectations and influencing USD/JPY movements...Additionally, the potential for large-scale intervention by Japan's MoF adds a layer of uncertainty and importance to the monitoring of these developments.

Société Générale Research/Market Commentary


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