Dollar's Sharp Drop Suggests No Yen-Buying Intervention, BOJ Current Account Forecast Shows
Digital FinanceMacro
In the foreign exchange market, the dollar/yen pair plunged more than 3 yen in a single day on the 3rd, leading some market participants to speculate about possible intervention. However, it appears that the government and the Bank of Japan did not conduct yen-buying intervention. If intervention had occurred, it would have been settled two business days later, so attention was focused on the BOJ's current account forecast for the 8th, which factored in the U.S. holiday. The deviation from market expectations remained within the range of error. According to the BOJ's forecast of factors affecting current account balances, fiscal and other factors were minus 560 billion yen, with the deviation from the forecasts of three private short-term money market brokers ranging from 460 billion yen to 760 billion yen. Market participants noted, "It can be said to be within the range of error, and it seems that no intervention was conducted," said Yuichiro Takai, a researcher at Totan Research. Considering the possibility of errors in both the BOJ's forecast and private forecasts, it is difficult to conclude that intervention occurred unless there is a divergence of more than 1 trillion yen between the two. In the currency market on the 3rd, the dollar/yen pair fell steadily from around 9 a.m. to 10 p.m. Japan time, with a range of more than 3 yen, leading to speculation in the market that intervention using the Time-Weighted Average Price (TWAP) method, which spreads large orders over time, had been conducted.
