Financial Associated Press, May 3 (editor Xiaoxiang) although the Japanese authorities have not officially announced their foreign exchange intervention so farArcadevideogamesBut a growing number of official data from the United States and Japan have shown that the two intraday surges in the yen in the past week are clearly related to the Bank of Japan.
Let's first take a look at the "evidence" provided by the Fed. The latest Fed account data show that the BoJ is likely to have funded currency intervention in two potential ways over the past week to support the troubled yen.
One source could be the foreign reverse repurchase agreement tool provided by the Fed, where central banks deposit overnight cash to earn market interest rates. The amount held by the Fed's foreign reverse repos facility fell by about $8 billion from a week ago to less than $360 billion as of May 1, according to the Fed's central bank. It was the first decline since the week ended April 10.
In addition, the size of a separate cash account used by the central bank has been reduced by about $17.8 billion.
On two occasions in the week covered by the data, Japanese policymakers (Monday noon and early Thursday morning Beijing time) may have intervened in the foreign exchange market, with the yen the weakest G10 currency against the dollar this year.
And if the "evidence" on the Fed's side is still relatively cloudy, some of the "clues" left by the Japanese side are more clear.
Through an in-depth analysis of the BoJ accounts, industry insiders speculate that such intervention does exist. According to the comparison between Japanese bank accounts and money brokers' forecasts, the latest intervention funds used by the Japanese authorities on Thursday may be about 3. 5%.Arcadevideogames.5 trillion yen (about 22.5 billion U.S. dollars).
The Bank of Japan reported on Thursday that its current account balance could fall by 4.36 trillion yen on the next working day, due to the closure, as a result of trading with government departments. By contrast, the average forecast for money brokers without intervention is 833 billion yen. The above estimate of 3.5 trillion yen is obtained by subtracting the two sets of data.
Earlier, market participants had used the same approach, predicting that the size of the Bank of Japan's intervention could be as high as 5.5 trillion yen by Monday. On top of the two, the total size of the BoJ's two interventions this week could be as high as $9 trillion (close to $60 billion at current exchange rates).
This number is obviously not small. In contrast, in the last dry forecast between September and October 2022, the Ministry of Finance spent a total of 9.2 trillion yen on three operations, suggesting that the scale of the current intervention is similar to that of that time.
Of course, comparisons of these estimates with central bank accounts yield only approximate figures, not specific amounts. Official monthly data on the scale of Japanese authorities' intervention will not be released until May 31. To see specific daily data, traders will have to wait until August or later.
"they [the Japanese authorities] are very good at hiding the intervention," said Gennadiy Goldberg, head of US interest rate strategy at TD Securities. They must have been prepared in advance, for example, they did not make rolling investments in advance and kept a lot of money in cash. "
Intervention also pays attention to "the right time and the right place".
Judging from the window of two suspected market interventions this week, it is clear that the Bank of Japan is also trying to make greater use of the "right place at the right time".
Monday's suspected intervention coincided with the Japanese holiday, when the yen fell to a 34-year low of 160.17, but then rebounded sharply in light trading. On Wednesday, the yen suddenly rebounded by more than 3% in the final hours of the New York session after an unexpected pigeon release at the end of the Fed's two-day policy meeting.
"with the arrival of Japanese holidays and US employment data, this is a very good time for the authorities to deal with speculators," said Yuya Kikkawa, an economist at the Ming Public Security Field Research Institute. This will have a huge impact on the market. I feel the firm determination of the Japanese authorities to defend the bottom line of 160 yen to the dollar. "
Japan's foreign exchange reserves stood at about $1.15 trillion at the end of March, an increase of $4.6 billion over the previous month, according to data released by Japan's Ministry of Finance. Of this amount, about $155 billion was deposited with the Bank for International Settlements and other foreign central banks, down slightly from $155.7 billion at the end of February.
It is worth mentioning that although the Bank of Japan is suspected to have expected a decline in the balance of the Fed's foreign reverse repos tool, Citigroup strategists mentioned in a report last month that Japanese officials did not use the Fed's tool during the last round of currency intervention in 2022, and most of the money in the tool has not been used for nearly a decade.
Instead, Citi believes that investors should pay attention to the changes in their holdings of Japanese and US Treasuries. Strategists at the agency expect some short-term Treasuries to be sold if the Bank of Japan intervenes again.
