Analyst: If CPI data pushes up the dollar, Japanese authorities may be forced to take action to support the yen

BlockBeats News, January 13 — Market analyst Jeremy Boulton stated that if Tuesday’s US inflation data pushes the dollar higher, Japanese authorities may be forced to take action to support the yen, as they believe the yen’s decline has been excessive. Since the release of last week’s US employment report, market expectations for Fed rate cuts have weakened, with the current forecast indicating only a 25 basis point cut, and the potential terminal rate of this easing cycle has been raised from 3.0% to 3.25%.

If December’s inflation data exceeds economists’ forecast of 2.7% year-over-year (with an estimated range of 2.5% to 2.9%), it will further reinforce this market expectation. Ironically, the current market has almost no speculative positions (yen net position about $200 million), and currency volatility has significantly decreased over the past year.

If Japan intervenes at this time, it could potentially create rather than suppress volatility. However, given the history of large-scale interventions in similar situations, any data further pushing the dollar higher could trigger a new round of intervention. (Jin10)