USD/JPY set for highest weekly close since 1986
I thought we might see some real currency intervention today after Japanese Finance Minister Katayama said he was prepared to take 'decisive action' on speculative moves in the yen.
That comment caused a quick fall to 161.00 from 161.70 but the pair soon rebounded to 161.30 and it's traded there since. If we finish around those levels, today will market the highest weekly close since 1986.
It's a dangerous game buying USD/JPY around these levels given the intervention threats but the market doesn't seem afraid, even going into a weekend. Japan has spent about $73 billion defending the yen so far this year and it hasn't dissuaded the market.
If there's no action up at these levels, the market might take it as a green light to drag USD/JPY to 165.00.
Ultimately, I don't think the weekly closes matter as much as the intraday levels. The Ministry of Finance is likely eyeing 161.99, which was a short-lived high on July 1, 2024. Starting in that month, USD/JPY sank all the way down to 140.00 with the bulk of that coming in five consecutive weeks from the start of July.
I don't see the risk-reward in USD/JPY longs at the moment but it's assuredly fundamentals carrying it and this week's hawkish press conference from Kevin Warsh gave the market ample reasons to buy dollars.
That might have some in Japan watching EUR/JPY. That pair is still within the tight range that it's traded in since November and right in the middle of that range.
Looking ahead, I would expect at minimum to get a barrage of yen-supportive talk in Japan next week. I would be careful to watch at the open of the week but officials also had a chance to intervene in low liquidity today and passed it up. The US is on holiday with stock markets closed.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
The AI boom may follow the path of the 19th-century railway bubble, and builders may not be the ultimate winners
Goldman Sachs analyst Bobby Molavi compared the current situation to the 19th-century British railway mania: 500 companies spent more than the nation's annual income building 8,000 miles of railway, with most early investors losing out, while the real beneficiaries were the later "passengers." He pointed out that the current AI craze is driven by both debt and momentum, and that the S&P 500’s forward P/E ratio of 18x is only "a bit cheaper." Whether the builders can retain value is uncertain, and history does not offer an optimistic answer.
If Anthropic's IPO goes smoothly and the stock price rises next week, then everything remains the same for AI. Otherwise, some companies will go bankrupt.
The shrinking valuations of two major giants have triggered a chain reaction—investors are adopting more conservative revenue multiples for AI startups and are directly halting high-valuation financing for companies with zero revenue. Multiple venture capital firms have advised their portfolio companies to lower valuation expectations and to quickly build up cash reserves. Market participants warn that the outcome of Anthropic’s IPO will be a barometer for the industry: if successful, the boom will continue; if it fails, some companies may face elimination.
After the Brazilian election, political discount deepens; Morgan Stanley remains bullish on Petrobras (PBR.US), focusing on fuel pricing and dividends
Morgan Stanley still maintains its most optimistic "Overweight" rating, but has lowered its year-end 2027 target price from $31 to $25.
Corning (GLW.US) receives initial "Buy" rating from Jefferies! AI factories driving a fiber optic rush, with a potential global supply gap of up to 30%
For Corning, the recent profit growth mainly comes from the expansion of AI clusters. As the number of optical links crossing cabinets and campuses increases, customers need to deploy more optical fibers within limited conduit and cabinet space, thus driving demand for high-density optical cables and connection systems.
Crypto prices
More
