Dollar-Yen Intervention Line Probably Above 152 Says Standard Chartered

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Analysts at Standard Chartered Bank say Japan's Ministry of Finance (MoF) might intervene in the USD/JPY exchange rate if it crosses the 152 level.

"The level of 152 in USD/JPY is pivotal, indicating a high likelihood of intervention if surpassed," says Steve Englander, one of the authors of a flash FX Alert from the bank.

This specific exchange rate level is highlighted by analysts as a critical threshold for potential action by Japan to stabilise its currency.

But, 152 is not necessarily a trigger level; "will they defend the 152 level with visible intervention? Yes, but the actual intervention line is likely to be somewhat higher and variable," cautions Englander.

Wednesday's U.S. CPI data will be a significant determinant for the timing of any potential intervention.

Englander notes, "They will most likely wait for US CPI on 10 April." This suggests that the MoF's decision could be influenced by this key economic indicator, indicating a strategic approach to intervention decisions.

Regarding the effectiveness of intervention without tightening monetary policy, the alert suggests authorities can be optimistic their efforts will bear fruit.

"Positions are very short JPY, and a lot of JPY was sold above 148. We think intervention would aim to push JPY to these levels, hoping that short-covering would take it further," says Englander.

For investors considering short-term strategies, the FX Alert suggests caution pending the CPI release. An inconclusive CPI aligned with expectations could lead to trimming crowded JPY shorts, while a surprise uptick might warrant profit-taking around the 153 level.

The possibility of US participation in coordinated intervention is addressed with a focus on current market and political conditions. "Our default view is no, in the absence of US Treasury commentary," Englander explains, assessing the likelihood of collaborative efforts between Japan and the United States in the currency markets.