Why the historic US-Japan intervention has failed to lift pressure on the yen
With a rare joint US-Japan market intervention weeks ago failing to rectify the weakness of the Japanese currency, Tokyo and Washington could be forced to launch another round of boosting efforts, with a deepening US Treasury rout expected to fuel the global yen carry trade, according to analysts. The yen has been on a sustained decline, falling to a 40-year low to trade above 163 per US dollar in late July. Though the US-Japan intervention briefly halted its slide, the currency has already...
Another US-Japan intervention may be needed to prop up the Japanese currency, as a US Treasury rout fuels the yen carry trade, analysts say
With a rare joint US-Japan market intervention weeks ago failing to rectify the weakness of the Japanese currency, Tokyo and Washington could be forced to launch another round of boosting efforts, with a deepening US Treasury rout expected to fuel the global yen carry trade, according to analysts.
“Intervention can alter positioning and disrupt momentum, but it has not changed the fundamental interest-rate differential that continues to favour the dollar,” said Gary Dugan, CEO of The Global CIO Office, which advises family offices and high-net-worth investors.
“That the yen has drifted [lower] despite a more hawkish Bank of Japan and direct intervention suggests investors still see US yields as the dominant variable.”
The 30-year US Treasury yield closed at 5.285 per cent on Tuesday, retreating slightly from a fresh 19-year-high earlier in the day. Meanwhile, the rate for 30-year Japanese government bonds closed at 4.141 per cent.
