News & Analyses

The Yen is far from being saved from further weakness – Commerzbank

USD/JPY scratched the 152.00 level. Ulrich Leuchtmann, Head of FX and Commodity Research at Commerzbank, analyzes the pair’s outlook.

The MOF’s firepower is in principle limited

Unlike in the 1990s and early 2000s, this time the direction of intervention (supporting the JPY) is one in which the MOF’s firepower is in principle limited – by the stock of foreign exchange reserves. At this point, I should find out how much foreign exchange reserves the MOF has access to. All it takes is a few clicks on my screen. But I don’t even need to do that. Because it must be absolutely clear that no currency reserves in the world will be sufficient if the foreign exchange market decides to bet against intervention.

But because a sufficient number of market participants have to agree on this, it is not certain that such market behavior will occur; it often requires a crystallization point, an occasion. 

Friday’s low inflation data from Tokyo could be such a crystallization point. This means that even though the market is currently reluctant to trade USD/JPY above 152.00, the Yen is far from being saved from further weakness.


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