punch lines
market vibes
This is the third of 3 essays I’ve written on dollar yen since July 22. I delved into the stock market in a way I didn’t expect to, but I’m glad I did. And there are some facts about gold that readers may not want to know but they should. ____________________________________________________________________________________________
In the final hour of trading on Friday CME yen futures made new weekly, monthly and quarterly highs. On Tuesday July 28, I wrote in my morning note, paper tiger… “The dollar’s recent strength is almost exclusively a USD/JPY story” and I made a strong technical case for a rally. However I thought it would be related to an FOMC or BOJ policy action. I didn’t put much weight in intervention because the MOF has been managing a downtrend since 2021 and every rally in Yen FX was temporary and brief.
In case you missed them last week, allow me to suggest you read paper tiger and a fragile equilibrium (linked later in the note).
Around lunchtime Friday reports began circulating that the MOF and US Treasury were executing a coordinated intervention in dollar/yen. Although there have been no official public statements, anonymous sources and the Financial Times said the New York Fed was selling euros to buy yen on behalf of the Treasury via Goldman Sachs and Morgan Stanley.
Finance Minister Satsuki Katayama declined to confirm intervention. She said authorities were in constant contact, but stopped short of confirming joint market operations. Atsushi Mimura, a high level spokesman said that Japan was receiving US support “that goes beyond psychological support.”
Treasury Secretary Scott Bessent publicly described the yen as “very undervalued,” noted excess volatility as unhealthy, and emphasized a “strong relationship and close coordination” with Japanese authorities (including in an X post). A Reuters photo of his notepad during a cabinet meeting showed a “To Do” item referencing “Buy Japanese Yen (JPY) $5-10 bil.”
In the last two years there have been 8 or 10 reportable intervention days. These occurred in just a handful of concentrated episodes. Four days in 2024, none in 2025 and a major episode during Golden Week. The MOF confirmed 3–4 trading days and a record monthly total of ¥11.73 trillion ($74 billion USD) of open market interventions. A detailed daily breakdown for the April–June 2026 quarter is expected around early August.
What happened in dollar/yen this week is eerily like what happened July 2024. Two weeks ago … I penned “a fragile equilibrium” …a brief history of the yen carry with a few notes forecasting the possible outcomes of the dual CB meetings last week. I was in the right church on USD/JPY FX but in the wrong pew on rate policy.
to deleverage or not … that is the question
