Title: USD/JPY slips below 144.00 as BOJ intervention jostles with US inflation-led woes

September 14, 2022 01:07 AM ET

By: AnalysisWatch

After two days of gains, the USD/JPY is back on the bearish radar, as fears of Bank of Japan (BOJ) intervention combine with strong early morning Asian returns. Mixed concerns about China and the global economic slowdown are also putting downward pressure on the yen-dollar pair.

Japan's Nikkei newspaper recently reported that the BOJ is said to be conducting a rate check in apparent preparation for currency intervention. The Japanese central bank reported probable delays in some settlements as some problems were identified with the BOJ's network system.

Earlier in the day, Japanese Finance Minister Shunichi Suzuki and top currency diplomat Masato Kanda expressed concern over the recent weakness in the yen while indirectly signaling that the chances of BOJ intervention were higher. Japanese 10-year government bond yields, reaching the upper limit of the BOJ's target range, are also supportive of the Japanese central bank's intervention.

On the other hand, the August U.S. Consumer Price Index (CPI) reignited the market's hawkish expectations for the U.S. Federal Reserve (Fed) and reignited recession fears via the inverted U.S. Treasury yield curve, which fueled USD/JPY. That said, the U.S. CPI beat market expectations by 8.1% to 8.3% y/y, up from 8.8%.

Following the data, 10-year Treasury yields increased to 3.412% and 2-year bond yields increased to 3.76%, up from around 3.424% and 3.771%, respectively, at the close.In addition, U.S. stocks experienced their biggest daily decline in nearly two years following the release of the U.S. CPI.

In a similar vein, one could point to headlines suggesting Taiwan's hosting of several foreign lawmakers in Washington to lobby for sanctions against China and U.S. lawmakers' vote on arms funding for Taipei.