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With BOJ intervention a possibility and US PMI in focus, USD/JPY is pushing toward 141.00

Daniel Rogers

Sep 23, 2022 14:22

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The US dollar/Japanese yen exchange rate stands between 142.27 and 142.58 during the Tokyo trading session. Having dropped to a low of less than 141.00, the asset has since reversed course. The major is likely to re-test the 141.00 support level due to the possibility of increased intervention by the Bank of Japan (BOJ) in currency markets to bolster the yen.


Due to the BOJ's intention to engage in the currency markets for the first time since 1998, the USD/JPY pair dropped significantly below 141.00. The BOJ has significant tools to maintain support for the yen as the world's second-largest foreign exchange reserve. Since the current price does not reflect the yen's true value, the Bank of Japan decided to step in to prevent further depreciation.


After the BOJ made its monetary policy pronouncement, it began intervening in the currency market. To no one's surprise, Bank of Japan Governor Haruhiko Kuroda stayed dovish on interest rates and said that the aggressive approach taken by the Federal Reserve (Fed) will have minimal impact on Japan's economy. He also said that the Japanese economy, which is still recuperating from the consequences of the Covid-19 outbreak, needs more policy easing.


Investors are waiting for volatility to diminish after the Fed's extraordinary hawkish attitude, keeping the US dollar index (DXY) stable around 111.30. On Thursday, after the DXY hit a fresh 20-year high of 111.81, sellers emerged and smashed the prevailing bullish pattern.


In the future, the S&P Global PMI data will be crucial. It is expected that the Manufacturing PMI would drop to 51.1 from 51.5 in the previous report. The Services PMI will go up to 45.0 from 43.7.