The Japanese yen is almost unchanged today, after being whipsawed over the past two sessions. In the European session, USD/JPY is trading at 1.48.93, down 0.06%.

It’s been a roller-coaster ride for the yen, as USD/JPY rose 1.7% on Friday and declined by 0.9% on Monday. It’s clear that the driver behind this volatility has been intervention by Japan’s Ministry of Finance (MOF), although officials in Tokyo are keeping mum.

The MOF intervened in late September, at a cost of around 2.8 trillion yen ($19.8 billion). Friday’s intervention was about double the size, and Monday was likely about the same. This means that the MOF is delivering a more powerful punch to deter speculators from betting against the yen. The interventions may have slowed the yen’s descent but it’s doubtful the moves will reverse the downward trend. Japan’s current policy mix is contradictory and likely unsustainable – the MOF is intervening in the currency markets while the Bank of Japan has intervened in the fixed-income markets and capped yields on Japanese government bonds.

Markets eye BoJ meeting

With the Federal Reserve widely expected to deliver another 0.75% rate next week, the US/Japan rate differential continues to widen, which will weigh on the yen. The MOF’s intervention and the subsequent volatility have heightened the interest in the BoJ’s meeting on Wednesday and Thursday, which some are calling a ‘do or die’ moment for the Japanese yen. If the BoJ continues its dovish policy and doesn’t provide the yen a lifeline, the yen is likely to fall even further.

Japan’s core inflation rose to 3.0% in September, its highest level in eight years. This follows the 2.8% gain in August and matched the consensus, and the yen’s reaction has been muted today.

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USD/JPY Technical

• USD/JPY faces resistance at 147.50 and 148.59
• There is support at 145.23 and 143.14

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.

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• Source: https://www.marketpulse.com/20221025/japanese-yen-settles-down-2/