EBC Markets Briefing | All eyes on Friday with a yen below 160

The yen languished near a 38-year low on Thursday and struggled on the weaker side of 160 per dollar. Japanese Finance Minister Shunichi Suzuki said authorities would take necessary actions on currencies.

Tokyo’s top currency official, Masato Kanda, warned on Monday that authorities were standing ready to intervene, 24 hours a day, if necessary, while reiterating they were not targeting a specific level.

Traders regard any move to prop up the yen before the PCE data as highly risky as the figures that are key to the outlook for US interest rates could immediately cancel out the impact of any premature intervention.

The country spent a record ¥9.8 trillion in its most recent bouts of intervention but the large interest rate differential has more than offset the effort.

Citi analysts expect Tokyo to act if it were to rapidly approach 162 over a few days, with a move at a slower pace unlikely to spur an intervention. They said timing could also be key.

A Friday afternoon at the tail-end of a New York trading day could prove to be a less liquid market, so technically a bigger impact will be made upon the currency move.

The yen remains fragile well above the 50 SMA that rejected any significant rally. But we do not see further weakening beyond 161 by Friday as the market is bracing for higher volatility ahead.

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