The last time the pair traded at the highs we’re seeing today was the day that the BOJ hammered down the pair back below the 150.00 mark in October last year. In case you need a refresher:
And now after weeks on end in poking and prodding just under the figure level, it looks like buyers are being allowed to test the waters above that in trading today. It does seem like Tokyo is getting rid of the shackles, at least for the 150.00 level for now:
USD/JPY daily chart
That comes despite a round of intervention efforts in early October. But with the bond market rout extending further and markets continuing to sense a divergence between the Fed and BOJ outlook, it’s a tough one to keep defending.
Last year, we saw Tokyo make two steps in their intervention efforts – one at 145 and the other at 150. So far, they’re only stepping in at 150 and it will be a tough one to think about where the next stop might be if they do decide to come in again. I reckon a lot of it will depend on the pace and steepness of the yen decline but the 155 mark will be a probable one. If not, they might look at the April 1990 highs closer to 160 before deciding to draw another line – especially if yields continue to soar.