Dollar-yen travelled 135 pips yesterday, from 157.86 down to 156.51, and the bottom of that move was a Ministry of Finance official telling the market to take the government’s concern about yen undervaluation seriously. Fifteen hours later, in the Tokyo morning, the pair is at 157.40. That is 89 of the 135 pips back, 66 percent of the range, and it leaves spot 46 pips below the high the intervention warning knocked it off. The verbal intervention worked, for one session, and the session is over.
Eighty-nine pips back, and the retracement happened in the quiet hours
The sequence, as two publishers have it. The high was 157.86. At around 08:21 UTC the Vice Minister of Finance for International Affairs, Mimura, said the government’s message on yen weakness was very clear and that he hoped the market would take it straightforwardly; the pair went to 156.62 and then extended the low to 156.51. By 02:00 JST it was at 157.31, having briefly printed around 157.57 just after midnight Tokyo time. This morning at 08:02 JST it is at 157.40.
Note where the recovery happened. Not in London, where the selling was, and not in the New York data window, because there was no New York data window. It happened between 02:00 and 08:00 JST in the thinnest book of the day. A yen rally driven by official words and unwound in illiquidity is a specific and recurring shape on this channel, and the practical consequence is about stop placement rather than direction: if you sold the Mimura headline and left a stop 100 pips above your entry, you were taken out overnight in a session nobody was watching, on no news at all.
The crosses did the same thing with less conviction. Euro-yen ran 179.73 to 178.20, a 153-pip range, and sat at 178.88 at 02:00 JST — below the midpoint, which is a different outcome from dollar-yen recovering two thirds of its range, and the difference is the euro leg rather than the yen leg. Euro-dollar had a forty-two-pip day inside 1.1353 to 1.1395 and was at 1.1371 at 02:00 JST.
The explanation in this morning’s headline does not survive the same session’s oil tape
The Tokyo morning note most Japanese retail desks will read today is headlined, in translation, that dollar-yen rebounded against a backdrop of high crude and that the effect of the verbal intervention is temporary. Its body says rising crude prices drove US long-term yields higher and that this triggered the dollar-yen recovery despite the ministry’s comments. The analytical claim in the second half — that verbal intervention can suppress speculative yen selling but cannot halt yen weakness rooted in an energy import deficit — is a serious argument and this desk does not dispute it.
The causal chain in the first half is the problem. Another publisher’s summary of the same New York session has WTI falling from about 95.50 dollars to below 92 — a drop of more than three and a half dollars during exactly the window in which the ten-year yield went from 5.21% to 5.25% and dollar-yen recovered. If crude fell while yields rose, crude did not drive the yields. There are two honest readings and both cost you something. Either the headline means crude is high in level rather than that it rose, in which case it is a standing backdrop and not an explanation of an intraday rebound at all; or it means crude rose, in which case one of these two pages is wrong about the direction of oil on a day when oil is the most-cited macro variable in the yen.
We are not going to resolve it by picking a number. A third reader put WTI at 93.30 with Brent at 106.10, which is a spread of 12.80 dollars between two grades that normally trade within a few dollars of each other — our read is that one of those two quotes is not contemporaneous with the other, which makes the page unusable as a tiebreaker rather than useful as one. So the oil level is a band, the oil direction on 28 September is contested between two publishers we otherwise rely on, and any inference you draw from “oil drove the yen back up this morning” is weaker than the sentence sounds. Treat the yield move as the observable and the oil story as an attribution.
A forecast range whose floor is yesterday’s low minus one pip
This morning’s published forecast range for dollar-yen is 156.50 to 158.20. Yesterday’s low was 156.51. The floor of today’s forecast is one pip below the level at which a finance ministry official stopped the market yesterday, and the ceiling is 34 pips above yesterday’s high.
That is not a criticism of the forecast; it is an observation about what a forecast range is when the previous session ended on official intervention. A 170-pip band anchored to yesterday’s extremes tells you the publisher expects today to be contained by the same two forces, and it gives you nothing at all about which way. A second Japanese desk gives the recent range as 156.50 to 157.50 and puts the level at which authorities become highly sensitive at 160, with the 157 to 158 area described as a zone where intervention is unlikely but heavy buying is expected. Read those two together and the honest summary is that the floor is politically defended, the ceiling is nearly three big figures away, and the thing you are actually trading in between is the yield differential.
On that differential: one Japanese reader puts CME FedWatch at roughly 70% for an October Fed hike, with better-than-even odds on consecutive October and December moves, against a Bank of Japan next expected in December. This desk has now carried a Fed October probability at 66%, at 67.5% and at roughly 70%, from three publishers at various removes, and has still not read the feed directly. State the number with the reader named or do not state it.
The session’s only scheduled risk is at 04:30 and it is not in your pair
The Reserve Bank of Australia announces at 04:30 UTC, 14:30 Sydney, with the press conference at 05:30 UTC. Expected outcome 4.60% from 4.35%, all four major Australian banks calling the hike, markets described as fully priced. Our Calendar desk has the detail this morning, including why we are not publishing a probability for it.
The reason it matters here is that it falls inside the Tokyo session and the yen crosses will wear the reaction whether or not the yen has an opinion. If the RBA hikes and the statement is read as the last one, Aussie-yen sells off into a dollar-yen that is already politically capped at the bottom and yield-supported at the top — which is to say a cross move with no help from either leg. If your exposure is expressed across several yen crosses, that is a correlated event in a thin book at an hour when the dollar-yen order flow that would normally absorb it is not there. Size the 05:30 window, not the 04:30 print, and check whether the 04:30 minute is in your news filter at all: an Australian decision is one of the events most often missing from schedules built around the London and New York sessions.
What this does not tell you
Yesterday’s extremes are one publisher’s session summary and the current level is another’s morning note. The 157.86 high and 156.51 low are internally consistent with the running low we published yesterday, which extended from 156.62 to 156.51 within an hour, but they are not independently second-sourced to the pip and this channel has twice found two publishers two pips apart on a session extreme. The 66 percent retracement figure inherits whatever error is in those two prints.
Mimura’s remark is now carried by two publishers, which closes an item we opened yesterday, but neither is the ministry and we have not read the remark at source. His name and title are established; the exact wording is a translation of a translation. A second official was named in this morning’s material in a form we could not reconcile with any real person, so we have cut the name and kept the event — treat “officials repeated the yen-weakness message” as the claim and nothing narrower.
The oil section deliberately states no WTI level. That is the point of it. If you need a crude number today, read three publishers and take the band, because the two we read most disagree about the direction and the third disagrees with itself across grades.
And the largest thing this does not tell you is whether the floor holds. Official yen-weakness messaging has now coincided with a session low twice in a week, on Friday and again yesterday, and both moves were substantially retraced. That is a sample of two, neither retracement followed a confirmed intervention, and Wednesday’s Ministry of Finance intervention data for 27 August to 28 September is the release that would tell you whether any money has been spent. It is at 10:00 UTC on Wednesday on this desk’s own say-so and we have said twice in print that we have not verified that time at the ministry.
Related
- FX events calendar — the 04:30 RBA, the 05:30 press conference and Wednesday’s intervention data, in UTC.
- Signals — how we treat an overnight retracement in a thin book.
- EA presets — correlated yen-cross exposure around an Asia-hours central-bank decision.
