ING’s Chris Turner highlights rare joint US-Japan FX intervention, with Washington participating via the Fed and Japan using the FIMA repo facility to raise Dollars against Treasuries. He argues the action does not alter fundamentals of a near-hiking Fed versus loose Japanese policy, and doubts USD/JPY can be driven sustainably below 155, seeing intervention mainly as a cap on moves toward 160.

Joint action unlikely to break 155

“The big story here is participation from Washington in bilateral intervention with Tokyo. The Fed had checked rates – a precursor to intervention – back in January, but seems to have pulled the trigger on Friday. Why now?”

“Perhaps US Treasury Secretary Scott Bessent had felt that the weak yen was undermining JGBs, which, in turn, was weighing on Treasuries. Notably, Japan has intimated it will be using the Fed’s new FIMA repo facility. This allows it to raise dollars against Treasury holdings rather than having to outright sell Treasuries to undertake intervention.”

“But equally, it does serve as a containment exercise, limiting investors from chasing USD/JPY through 160 and buying time for Tokyo to introduce more yen-positive policies. These could include more incentives to invest in Japanese domestic assets.”

“There is a lot to say on this subject, but what does it mean for USD/JPY prospects? This intervention does not change the fundamentals of a Fed close to hiking and Tokyo running a loose set of monetary and fiscal policies, which are weighing on the yen. We struggle to see this bilateral action driving USD/JPY sustainably below 155.”

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)