Yen Surges On Another Bank of Japan Bid

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The Japanese Yen has powered higher, with analysts saying the Bank of Japan might have again intervened as it pursues a new strategy of kicking the Dollar when it's on the back foot.

The Yen is powering higher, registering a 1.10% d/d advance against the U.S. Dollar at the time of writing, taking it to 156.55.

"The catalyst for the move in USD/JPY appears to have been UK CPI surprising slightly higher (core CPI +3.5% y/y vs. consensus +3.4% y/y), pushing GBP higher as markets pared back August BoE expectations," says Max Lin, a strategist at CIBC Capital Markets. "The yen rallied in sympathy with sterling but accelerated once USD/JPY broke below the 50-DMA level of 157.95."

The UK inflation print triggered the initial Dollar weakness, which looks to have invited the Bank of Japan into the fray. Reuters reports that some traders think the move lower in Dollar-Yen received a helping hand from the Bank of Japan.

Analyst Jonas Goltermann at Capital Economics says such an intervention would fit a new tactic by the Bank of Japan that sees it intervene when the Yen is on the front foot. "Policymakers are now taking a more aggressive approach," he says.

Above: USD/JPY at 30-minute intervals.

Vice Finance Minister Kanda appeared on the newswires during the move, reiterating that authorities "will respond appropriately to excessive moves."

Authorities in Japan have grown anxious about the Yen's multi-year weakness and have at times intervened in the market to signal to market participants that chasing the currency lower is not without risk.

By hammering the Dollar-Yen in moments of weakness, one of FX's most popular and profitable trade starts to look less inviting.

Wednesday's would mark the fifth intervention by the Bank of Japan in the market.

The most recent data from the Bank shows another round of FX intervention in support of the yen was conducted last week.

Capital Economics estimates suggest the Bank bought around $22bn worth of yen on Thursday and another ~$13bn on Friday.

Last week's interventions came when the yen was already rebounding against the dollar.

"Officials stepped in at a time when the yen was already rebounding against the dollar. The first apparent intervention came after the publication of US consumer price inflation data that was softer than generally expected, which led the dollar to weaken against all other major currencies," says Goltermann. "Intervention accelerated that move, driving the yen sharply stronger on the day."