The Japanese Yen was trading significantly lower at the end of last week, as rumours surfaced of further intervention in the USD/JPY currency pair at the end of the week. It was speculated that the Japanese Foreign Ministry was delving in to the currency markets, apparently continuing the intervention that we have seen over the last few weeks.
Whether it is true or not, the rumour itself certainly had a tangible effect on the market, and the Yen was sent lower to close the week approximately unchanged from the open on Monday.
Our belief is that indeed the Foreign Ministry did push a few buttons and attempt to buy the USD throughout the end of the week, albeit in smaller amounts than the past. You will all remember not too many weeks ago when the Japanese central bank came to the party and bought a huge number of USD – which sent the USD/JPY skyrocketing around 300 pips or so.
The same movement seems to have taken place in the EUR/JPY currency pair also. The Yen traded at 112.95 at the end of the week versus the EUR, which was down almost 100 pips from the starting level at the beginning of the week – at 113.75.
Regardless of whether the Japanese Foreign Ministry did intervene or not, it is certainly clear from this recent fall that investors are nervous as to the future of the currency.
The large gains that the Yen has made over the past few months seem to be coming to an end, and the momentum is definitely dying out. However, it is unclear as yet whether or not the definite low has been reached in the USD/JPY pair. As we always say – the market has its own mind, so it wouldn't be at all surprising if having just said that, the market returns to form a new low in the next month or so. If this happens however, it could be rather short lived.
What is clear in this situation however is that the Japanese Foreign Ministry is keeping a close eye on the currency markets, and will no doubt trade more Yen and USD's should the need arise.
Whether it is true or not, the rumour itself certainly had a tangible effect on the market, and the Yen was sent lower to close the week approximately unchanged from the open on Monday.
Our belief is that indeed the Foreign Ministry did push a few buttons and attempt to buy the USD throughout the end of the week, albeit in smaller amounts than the past. You will all remember not too many weeks ago when the Japanese central bank came to the party and bought a huge number of USD – which sent the USD/JPY skyrocketing around 300 pips or so.
The same movement seems to have taken place in the EUR/JPY currency pair also. The Yen traded at 112.95 at the end of the week versus the EUR, which was down almost 100 pips from the starting level at the beginning of the week – at 113.75.
Regardless of whether the Japanese Foreign Ministry did intervene or not, it is certainly clear from this recent fall that investors are nervous as to the future of the currency.
The large gains that the Yen has made over the past few months seem to be coming to an end, and the momentum is definitely dying out. However, it is unclear as yet whether or not the definite low has been reached in the USD/JPY pair. As we always say – the market has its own mind, so it wouldn't be at all surprising if having just said that, the market returns to form a new low in the next month or so. If this happens however, it could be rather short lived.
What is clear in this situation however is that the Japanese Foreign Ministry is keeping a close eye on the currency markets, and will no doubt trade more Yen and USD's should the need arise.
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