It has been two years since Tokyo last intervened in currency markets. Is it time to let our guard down and look for positions above 160?
To prevent further depreciation of the yen below the 160 mark, Japanese officials have relied on verbal warnings.
Since their last intervention, however, they have refrained from using the phrase “bold action,” a signal widely interpreted as a final warning. Traders might want to set an alert for when this phrase is spoken by Japan’s FX chief.
One new strategy Japan is exploring is using oil futures as an alternative to direct intervention. This would keep the market guessing and deter speculative yen trading.
If Japan’s intervention in the oil futures market causes oil prices to fall, the country would spend less on oil imports. This would reduce the demand for USD to pay for oil, helping to prevent the yen from weakening further.
The Finance Ministry has reportedly contacted major banks in Tokyo with oil trading operations to assess the feasibility of intervening in crude oil futures. However, this could just be another verbal warning in a different form.
For the exact date and time of major economic events, import the BlackBull Markets Economic Calendar to receive alerts directly in your email inbox.
Trading involves risk and may not be suitable for all investors. The information provided in this article is for educational purposes only and does not constitute financial advice. Always conduct thorough research and seek professional advice before making any investment decisions.
