Analyst: If CPI Data Boosts USD, Japan Authorities May Be Forced to Act to Support JPY
BlockBeats News, January 13th - Market analyst Jeremy Boulton stated that if the US inflation data released on Tuesday pushes up the US dollar, the Japanese authorities may be forced to take action to support the yen as they believe the yen has depreciated too much. Since the release of the US employment report last week, market expectations for a Fed rate cut have somewhat diminished. It is currently expected that the rate will only be cut by another 25 basis points, and the potential terminal interest rate for this easing cycle has been raised from 3.0% to 3.25%.
If the December inflation data is higher than the economists' expected year-on-year 2.7% (estimated range is 2.5% to 2.9%), it will further strengthen this market expectation. Ironically, the current market has almost no speculative positions (yen net position is about $200 million), and exchange rate volatility has significantly decreased over the past year.
If Japan intervenes at this point, it may create rather than suppress volatility. However, given the history of large-scale interventions in similar situations in the past, any further data that pushes up the US dollar could trigger a new round of intervention actions. (FXStreet)
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