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2026-09-21 07:34:10
【Yen Weekly Outlook: Holiday Liquidity Declines and Insufficient Central Bank Guidance Make the Yen Prone to Sharp Fluctuations and Further Weakening】 (1) The yen is highly likely to experience sharp fluctuations and further weakening in the coming week. Japan is about to have a three-day holiday, which will reduce market liquidity; at the same time, the Bank of Japan has not given clearer guidance on the pace of subsequent interest rate hikes, disappointing investors. (2) On Monday, the yen stabilized at around 156.86 yen to the US dollar. Last Friday, the yen fell by as much as 1.3% when two board members of the Bank of Japan opposed the interest rate hike. (3) Later, there were reports that officials called market participants to conduct exchange rate verification, which was a precursor to potential foreign exchange market intervention and yen buying, but the news only slightly narrowed the yen's decline. (4) Last week, the yen depreciated by more than 2% cumulatively, marking the largest weekly decline in nearly a year. (5) James Reilly, senior market economist at Capital Economics, wrote in a report that, similar to the recent strong rise of the yen before most central bank meetings, the Bank of Japan has completely curbed its momentum this time; it can be said that the significant improvement in the yen's performance against the US dollar will depend on factors in the United States. (6) The recent news of a currency verification also highlights the possibility that Japanese authorities may intervene in the market again to prevent the yen from weakening further. Once intervention occurs, the exchange rate will fluctuate rapidly and violently, causing losses to traders. (7) Japan's holiday, which lasts until Wednesday, will cause insufficient market liquidity. If the authorities intervene, the effect of the intervention will be amplified. A similar situation occurred during the Golden Week holiday in late April and early May this year, when the yen fell below the 160 mark and Japan implemented foreign exchange market intervention.
