USD/JPY drops over 1.5% intraday, intervention speculation resumes

The US dollar against the Japanese yen fell sharply today, more than 1.50%, now reported at 155.49, breaking through the key resistance level of 157 formed after intervention last week.

At the same time, the US dollar index dropped 0.44% to 98.07, spot gold rose by more than 2.3% to $4.661.

At the end of the Golden Week holiday, market liquidity is relatively low, and speculation about the Japanese authorities' silence about intervention is resurfacing. Japanese Finance Minister Kataoka Itoku declined to comment on whether there was intervention, merely stating that the market has seen speculative fluctuations.

According to Bloomberg analysis, the Japanese authorities are suspected of using approximately 5.4 trillion yen ($34.5 billion) to support the yen last week, marking the first time in the market since July 2024, and also one of the largest one-time interventions in history.

Goldman Sachs economist Yuriko Tanaka pointed out that this intervention was triggered when the yen broke below the 160 mark, and it happened in an environment where fluctuations were relatively moderate, showing that the authorities are viewing the 160 level as a "defensive line" that must be defended.

Goldman Sachs calculated that with Japan's approximately $1.2 trillion in foreign exchange reserves, they could theoretically perform interventions of the same magnitude about 30 more times. However, the report also emphasized that the Ministry of Finance will prudently keep ammunition in reserve and act when the yen depreciates rapidly to maximize the intervention effect.

The root cause of the yen's pressure is still the interest rate differential between the US and Japan. The Bank of Japan kept the interest rate at 0.75% for the third consecutive time at the end of April, with the market viewing June as the next window for a rate hike. The US Federal Reserve is also expected to remain on hold in its interest rate decision this week, making it difficult to change the short-term pattern of about a 300-basis-point interest rate gap between the US and Japan. However, it has been reported that US Treasury Secretary Bethent has expressed a willingness to buy yen jointly, an attitude that is broadening Tokyo's decision-making space.