Traders report that hedge funds are hesitant to establish fresh long positions in the US dollar against the Japanese yen at current levels, fearing Japanese authorities might intervene in the market this Friday when US markets are closed for a public holiday.
Given the decline in oil prices since the Federal Reserve's June policy decision, these funds are also awaiting a speech from Federal Reserve Chairman Kevin Warsh scheduled for Wednesday. Traders indicate that investors are adopting a cautious stance ahead of the release of US employment data on Thursday.
Traders further added that if Warsh delivers hawkish remarks and the US non-farm payrolls data supports the case for a Federal Reserve interest rate hike, the USD/JPY exchange rate could approach the 165 level.
However, traders note that Japan's Ministry of Finance has issued multiple warnings about potential intervention. With liquidity expected to be thin during the US market holiday, Japanese authorities might choose to act on Friday.
The USD/JPY pair rose 0.2% to 162.23.
Comments