Foreign exchange traders seem to be beginning to conclude that even if the Japanese government and the Bank of Japan implement further interventions to buy the yen and sell the dollar, the effect of supporting the yen exchange rate will be less than before.
The US dollar/yen exchange rate remained at the level of 145.90 yen to the dollar, the level at which the government and the Bank of Japan decided to intervene on a scale of 20 billion dollars (approximately 2.9 trillion yen) in September. Equity implied volatility (IV) is trading well below the highs seen in the month. The yen has fallen for eight weeks in a row, its longest decline since May.
Chris Weston, head of research at the Pepperstone Group, said in a note on Tuesday that “the 10.1% implied volatility of the dollar/yen has fallen 10.1% despite all the heightened interest in how central banks prepare to control and intervene.” “I’m actually surprised that it’s still at the level it is,” he said, adding, “If the dollar/yen hits new highs, it’s highly likely that the government and the Bank of Japan will intervene to put a brake on the yen’s depreciation.”
Dollar/yen traders are also waiting for September’s US Consumer Price Index (CPI) data to be released on Wednesday. August’s CPI showed stronger-than-expected growth, prompting growing speculation that the US Fed will continue to aggressively raise interest rates, and the yen has depreciated.
The difference in the direction of monetary policy between Japan and the United States has become clear, and the yen has fallen more than 20% against the dollar this year.
news-rsf-original-reference paywall">Original title:Yen Traders Show Resilience to Risk of More Japan Intervention(excerpt)