Forex Market: USD/JPY trades near 32-year peak, depreciating Yen reinforces intervention concerns

Having reached a 32-year peak of 148.86 last Friday on firm US Dollar and surging US Treasury yields, the USD/JPY pair was trading just below that level at the start of the new week.

The Japanese currency remains at risk of depreciating further to the psychological level of 150, which market players believe may prompt the government to intervene once again and support the Yen.

Top currency diplomat Masato Kanda said authorities would decisively respond to any excessive currency fluctuations, while G7 and G20 members would respond appropriately to an agreement on foreign exchange market moves last week.

“There’s certainly a potential, it’s a question of when they make up their mind to do so,” Moh Siong Sim, a currency strategist at Bank of Singapore, was quoted as saying by Reuters, suggesting another possible intervention.

In September, Japanese authorities conducted their biggest-ever currency intervention to prop up the rapidly depreciating Yen, while spending JPY 2.84 trillion.

Meanwhile, the latest red-hot US inflation data triggered bets of another interest rate raise at the upcoming FOMC meeting.

Markets have now priced in a 90.9% chance of a 75 basis point rate hike and a 9.1% chance of a super-sized, 100 basis point hike.

“The USD remains dominant, and is likely to reassert, if not stamp, its superiority on any sustained challenges,” Vishnu Varathan, head of economics and strategy at Mizuho Bank, said.

As of 8:52 GMT on Monday USD/JPY was inching down 0.02% to trade at 148.703. Last week, the major Forex pair climbed as high as 148.86, which has been its strongest level since August 1990.

USD/JPY has risen 2.77% so far in October, following another 4.15% surge in September.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 148.22
R1 – 149.36
R2 – 150.00
R3 – 151.13
R4 – 152.27

S1 – 147.59
S2 – 146.45
S3 – 145.82
S4 – 145.19