Yen intervention looming

The Japanese yen is showing the weakest performance of the G8 currencies on Wednesday, which is supporting the USDJPY currency pair to trim previous losses and return to levels near 156.50.

Heightened expectations that the Bank of Japan might raise interest rates in the coming months have failed to provide any significant support to the yen.

A report released by Reuters earlier on Wednesday affirms that the BoJ is preparing markets for a potential interest rate hike, which might come as early as next month, as concerns about the economic consequences of a weak yen have offset the Japanese cabinet’s reluctance towards monetary tightening.

The yen has depreciated nearly 5% from early October, when the pro-stimulus Prime Minister Sanae Takaichi came into power, and more than 10% since Trump announced trade tariffs in April. This decline has forced the Japanese authorities to warn about a potential intervention to stem JPY weakness, which might take place during the US Thanksgiving festivities, in the last half of the week.

The Japanese calendar has been thin so far, and investors are looking to the advanced Tokyo CPI figures for November, which are due on Thursday, for confirmation of the BoJ’s interest rate calendar. The market consensus points to a moderating consumer inflation.

In the US, September’s delayed Retail Sales figures showed weaker-than expected consumption figures, while producer prices steadied and consumer confidence deteriorated.

These data come after the dovish comments by Federal Reserve officials Waller and Williams, and have contributed to boosting bets for Fed easing in December, therefore, adding pressure on the USD.

(Source: OANDA)