Goldman Says Japan Can Fund 2 More Yen Interventions as $1 Trillion Fed Backstop Looms
Updated
Updated · CNBC · Aug 13
Goldman Says Japan Can Fund 2 More Yen Interventions as $1 Trillion Fed Backstop Looms
3 articles · Updated · CNBC · Aug 13
Summary
$200 billion in cash or cash equivalents gives Japan room for a couple more yen-buying operations on the scale of July's intervention, Goldman Sachs said, with the Fed's FIMA repo facility potentially making its full roughly $1 trillion reserve pile liquid.
$85 billion was likely spent in the first two days of late July's joint U.S.-Japan action, Goldman estimated, after the yen slid toward 164 per dollar; the currency later strengthened past 158 but has since drifted back near 160.
Options markets still price the risk of another sharp yen surge, which Goldman says may itself deter fresh yen selling even as spot weakens again toward intervention territory.
4.690% U.S. 10-year Treasury yields versus 2.839% on Japanese 10-year bonds remain the main drag on the yen, leaving the BOJ's September meeting critical as markets price a 65% chance of a 25-basis-point hike.
A faster BOJ tightening path or softer U.S. data could reduce pressure on the yen, while a September hold would likely renew depreciation after a roughly 45% slide over five years, Goldman said.