 Yen is under intense scrutiny today as it continues a six-day losing streak, approaching the key psychological level of 160 against Dollar. This move comes despite Japan's core inflation reaccelerating in May, but failed to meet market expected pace. Additionally, core-core CPI, which excludes both food and energy, and services inflation both continued to decline. These mixed signals undermine the case for BoJ to consider raising interest rates again in July. Furthermore, BoJ has yet to clarify its stance on the tapering of bond purchases, adding to the market's uncertainty. As the Yen edges closer to 160 per Dollar, a level often associated with intervention by Japanese authorities, comments from Japanese officials suggest a more hands-off approach. Masato Kanda, Japan's top currency diplomat, reiterated that the authorities are prepared to counter speculative and highly volatile moves in the currency markets. But more importantly, he emphasized that intervention is "not intended to change the market's trend." He added that as long as currency rates move stably in line with economic fundamentals, there is no need for intervention. Kanda's comments could be interpreted by some that the authorities might tolerate further Yen depreciation, provided the movement is orderly and reflective of underlying economic conditions. So, Japan's reaction to USD/JPY at 160 in the next few days would be crucial to decide whether the intervention threshold has already moved up, say to 165 or 170... |
