Japanese yen remains below 160
USD/JPY is trading at 160.38 early in the North American session, down 0.25% on the day. The Japanese yen has been trading below 160 on Thursday, after dropping as low as 160.87 on Wednesday, its lowest level since December 1986.
As the yen continues to hit new lows, there are concerns of another intervention from the Bank of Japan in order to stem the currency’s rapid depreciation. The BoJ is believed to have intervened on April 29, when the yen fell as low as 160.20 and again on May 1, selling some $61 billion and purchasing yen. The first intervention boosted the yen by 1.25% and the second by 2%. However, the moves haven’t had a lasting effect and all of the yen’s gains have been wiped out.
Predictably, Japanese officials have warned that they will take action and Japan’s top currency diplomat Masato Kanda said on Wednesday that the yen’s rapid deprecation was a “serious concern” and that he was monitoring events with a “heightened sense of urgency”.
The verbal intervention is unlikely to have much effect, given that actual intervention has failed to stem the yen’s rapid decline. Japan’s interest rates are around zero and with the Federal Reserve not lowering rates before September at the earliest, the US/Japan rate differential will remain wide. It could be a miserable summer for the Japanese yen.
There was some good news as Japan’s retail sales rose 3.0% y/y in May, up from a revised 2.4% gain in April and blowing past the market estimate of 2.0%. This marked a 26th straight month of expansion, as higher wages have fueled stronger consumer spending.
USD/JPY Technical
- USD/JPY is testing support at 160.43. Below, there is support at 160.00
- There is resistance at 161.26 and 161.69
