ING’s Chris Turner notes that USD/JPY is back in Japan’s FX intervention zone as global shocks and Oil prices surge. He sees coordinated US–Japan action as unlikely but warns that any such move could knock USD/JPY down by several big figures. Authorities may focus on psychological levels around 160 in USD/JPY as they seek Dollar liquidity.

BoJ and authorities eye intervention levels

"USD/JPY has now firmly moved back into the FX intervention zone. The debate is whether this global shock makes it less likely that the Japanese will intervene. Or, with talk of a co-ordinated oil release, does that make co-ordinated US-Japan FX intervention more likely? The latter is probably still too much of a stretch."

"Were it seen, however, USD/JPY could probably fall three to five big figures and short-dated volatility would spike."

"Yet, unless we see some signals of an imminent return of oil supply, we will not be in an environment where FX intervention is effective nor the USD/JPY correction lower sustainable."

"But 160 in USD/JPY and 1500 in USD/KRW are big psychological levels for local authorities. And these are the financial market's best bet of a big supply of dollars anytime soon."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)