Yen's Rapid Weakening: Japan's Warning and Potential Currency Intervention
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Earlier this week, Japan’s top currency diplomat, Masota Kanda warned that the yen’s weakening was “rapid and one-sided”. Kanda said he would not rule out any options, including currency intervention.
The markets have become accustomed to verbal intervention when the yen drops sharply, but Tokyo followed its bark with a bite late last year, when it intervened in the currency markets after the yen fell below 151. As the yen continues to depreciate, currency intervention becomes a stronger possibility.
On Tuesday, the US posted solid releases, an indication that the economy remains resilient despite the Fed’s aggressive tightening. Durable Goods Orders and New Home Sales were higher and beat expectations, and Conference Board Consumer Confidence jumped in June from 102.5 to 109.7, its highest level since January 2022. The strong numbers provide support for a Fed hike in July, with the markets pricing rate increase at 79%, according to FedWatch.
USD/JPY Technical
- USD/JPY is testing resistance at 144.65. The next resistance line is 145.36
- There is support at 142.94 and 142.00
US Data
MBA mortgage applications in the US rose for a third straight week, despite surging rates as housing demand remains healthy. The effects of the tightening of lending conditions are being reflected in the data, as the credit jumbo rate(expensive homes) rose to 6.91%, which is well above the Average 30 year fixed rate of 6.75%.
The housing market isn’t weakening yet despite rising costs because demand is still growing and supplies remain tight.
