Sliding Yen Has Tokyo Worried

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The Japanese yen remains under pressure. In the North American session, USD/JPY is trading at 143.96, up 0.14%. The yen came within a whisker of the 145 line on Wednesday, touching 144.99.

Japan sounds alarm as yen slips

The yen continues its nasty slide. USD/JPY has jumped about 8% since August 1st, and continues to record new 24-year highs. It’s not just that the yen is trading close to 145, but the speed at which the Japanese currency is depreciating. USD/JPY broke above the 140 line on September 1st and the dollar onslaught has continued without letup.

The yen’s most recent fall has, predictably, resulted in Japanese officials sounding the alarm. Masato Kanda, Japan’s top currency official, said today that the government and the BoJ were “extremely worried” about the recent yen moves, and are watching the currency markets with a strong sense of urgency. Kanda added that “the government is ready to take action in the currency market”, but his remarks have done nothing to stop the yen’s downswing.

Investors have heard this rhetoric time and time again, without any action from Tokyo. The last time Japan intervened in the currency markets to prop up the yen was in 2011, and the BoJ is committed to an ultra-loose policy to support growth, and Governor Kuroda has ruled out tightening policy until inflation remains sustainably above 2%, along with higher wage growth. Inflation is running close to 3%, but this is mainly due to higher import costs, which the BoJ considers a temporary cause of rising inflation.

With the government unlikely to intervene and the BoJ suppressing any rate increases, the yen is at the mercy of the US/Japan rate differential, which has been moving higher. With the Fed expected to remain aggressive, the yen is likely to continue heading lower.

USD/JPY Technical

• There is support at 142.75 and 141.48
• USD/JPY is testing resistance at 143.81. Above, there is resistance at 144.70, which was tested on Wednesday