USD/JPY surges as election uncertainties resurface – ING
USD/JPY Surge Continues Amid Political Uncertainty
The upward momentum in the USD/JPY exchange rate shows little sign of slowing, as speculation grows over the possibility of early elections in Japan. This renewed political risk is prompting markets to re-examine how much currency weakness Japanese authorities will tolerate. Additionally, ongoing diplomatic strains between Japan and China are intensifying the situation, according to Francesco Pesole, a foreign exchange strategist at ING.
Currency Intervention Unlikely to Shift the Trend
“At the start of the week, we anticipated that the USD/JPY could climb as high as 160. Although concerns about potential intervention might cause the rally to lose steam near that level, it now appears increasingly probable that this threshold will be reached. In July 2024, Japanese officials allowed the pair to surpass 160, only stepping in when it nearly hit 162. Since the Bank of Japan has yet to act, it seems likely they will wait until the exchange rate exceeds 160 before intervening.”
“To put things in perspective, the initial intervention on July 11, 2024, resulted in a 1.8% drop in USD/JPY. At that time, CFTC data showed net non-commercial yen positions at -52% of open interest, whereas now they stand at a modest 3% net-long, despite spot market movements suggesting otherwise. The key question is whether foreign exchange intervention can truly spark a lasting recovery in the yen.”
“Historically, intervention alone rarely leads to a sustained reversal. Earlier in 2024, such actions temporarily eased upward pressure, but the subsequent decline in USD/JPY was entirely driven by a sharp, 50 basis point fall in US 2-year swap rates over the following month. That scenario seems unlikely at present, and with the possibility of snap elections looming, markets remain hesitant to anticipate any Bank of Japan rate hikes before summer.”
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
UBS: US Companies’ Capex Willingness Rebounds from Bottom, Further Rate Hikes May Have Limited Impact on Economy
UBS believes that traditional U.S. investments have been subdued for a long time and are at a low level, with limited room for further rate hikes to have an impact. Meanwhile, corporate operating cash flow has increased by 25%, providing sufficient internal funds, which may weaken the transmission effect of interest rates on Capex. As capital expenditure willingness rebounds from historic lows and non-AI investments show signs of stabilization, U.S. corporate investment may be entering a recovery phase.

As Nscale submits its IPO application, Bernstein "diagnoses" AI computing power cloud: CoreWeave (CRWV.US) "underperforms the market," IREN (IREN.US) "outperforms the market"
Last Friday, the emerging British AI computing power company Nscale officially submitted its S1 prospectus. This long-anticipated document offers a new reference point for Bernstein to analyze the business model, competitive barriers, and potential risks of the new generation of computing power cloud sector.
Cardano rises 17% in one month, eyes top 10 amid market rally
Solana Flips Robinhood Chain to Lead Tokenized Commodities DEX Volume

