Key Points:
The Japanese yen has continued its downward spiral, hitting levels not seen since 1986, with the USDJPY currency pair breaching the ¥161.00 mark and peaking at ¥161.30. This trend has persisted despite recent attempts at intervention, raising concerns among Japanese officials and traders alike.
Picture: JPY losing strength against USD, as observed on the VT Markets app.
The Finance Minister of Japan Shunichi Suzuki issued a statement expressing deep concern over the rapid depreciation of the Japanese yen and its potential impact on the economy. He emphasised that the government is ready to take appropriate action against excessive speculation in the foreign exchange market.
This intervention talk follows a 15% decline in the value of the Japanese yen this year, marking it as the weakest performer among major currencies.
Back in April, Japanese authorities intervened by purchasing approximately $60 billion worth of yen to stabilise the currency. Despite these efforts, the intervention had limited success, highlighting the challenge Japan faces in countering the strong US dollar, driven by stark interest rate differentials between the US and Japan.
The ongoing weakness of the Japanese yen has traders on high alert for another potential intervention, whereby the authorities may be forced to buy substantial amounts of its own currency while selling the US dollar to slow down the decline.
However, the limited success of the previous intervention raises questions about the effectiveness of such measures in the current economic environment.
Opportunities and risks for day traders
Given the current trajectory, the USDJPY currency pair could continue testing new highs, setting up the potential for trend trading.
Nonetheless, traders should prepare for increased volatility and potential rapid shifts in the market, especially with further statements or actions from Japanese authorities. As always, risk management is vital in navigating the volatility and market shifts in the USDJPY currency pair.
