Japanese Yen: Joint intervention lifts JPY against US Dollar – Rabobank

Rabobank’s Senior FX Strategist Jane Foley highlights that Japanese authorities benefited from the post-FOMC US Dollar (USD) drop, which eased pressure on the Japanese Yen (JPY). The report explains how speculative long USD positions were unwound after the July 29 Fed meeting and how Japan’s Ministry of Finance intervention in USD/JPY amplified the move. It also details US Treasury cooperation via the FIMA Repo Facility to avoid forced Treasury sales.

Japanese and US authorities shape pair

“From the point of view of the Japanese authorities, the decline in the USD’s value that followed the Fed meeting last week was fortuitous, if not overdue. Until late last week the MoF had not intervened in the FX market in support of the JPY since late May and the strength of the greenback in this period may explain why.”

“That said, the USD did not react well to the July 29 FOMC meeting. While surveys of economists had correctly stressed little risk of a rate hike, some market participants were betting that Fed Chair Warsh would deliver a policy tightening in order to prove his inflation fighting credibility. These positions were subsequently unwound.”

“Indeed, CFTC speculators’ data highlight that in the approach to that meeting long USD positions had been built to their highest levels since September 2024, suggesting that profit-taking in the USD was almost inevitable. The move lower in the USD was accentuated by the intervention in USD/JPY by Japan’s Ministry of Finance.”

“As we discussed on this page yesterday, a key question regarding what drove the US Treasury to intervene with Japan’s MoF in support of JPY is ‘what was in it for them?’ By making the Fed’s Foreign and International Monetary Authorities (FIMA) Repo Facility available, the MoF was able to temporarily exchange US treasuries for USD.”

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)