According to a senior advisor from the foreign exchange and rates client team at Sumitomo Mitsui Trust Bank's Global Markets Sales Division, Michiyoshi Kato, the yen's depreciation is expected to halt around the 162 yen per dollar level due to market concerns over potential intervention by Japanese authorities.
A significant concentration of foreign exchange options is situated near the 162 level, drawing considerable market attention to this threshold.
Kato noted that while some anticipate an acceleration in the dollar's rise should it breach the 162 level, fears of intervention are currently restraining aggressive dollar buying.
The effectiveness of currency intervention depends more on how the authorities execute it and communicate their intentions than on the scale of the intervention itself.
Given that daily foreign exchange trading volumes reach trillions of yen, an intervention to buy yen, even amounting to 10 trillion yen (approximately $619 billion) or 30 trillion yen, is unlikely to alter the market's overall direction on its own.
Conversely, if authorities can send a strong signal to the market, such intervention measures may help curb speculative activities.
The intervention conducted in April likely played a role in dampening the currency's upward momentum, and it is noteworthy that since then, the dollar-yen pair has not seen a decisive move to break through the 162 level.
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