Francis Hunt
Trading Education, Hunt Volatility Funnel & Capital Preservation
The US needs a weaker yen, so Treasury Secretary Bessent's visible note to "Buy Japanese Yen (JPY) $5-10 bil," chickenfeed in any case, looks like a psyop and misdirect, calling for the opposite positioning; the buying was a chunk of carry trade to close. Per @TreasuryBonds1, Japan reportedly spent about $53 billion buying yen in a single day, its largest intervention ever, and Bessent called the yen very undervalued. x.com x.comÂ
The yen's decline is deliberate rather than the product of incompetence. Japan lost its economic sovereignty after World War II, served as the original test bed for QE, and the yen was intentionally set up as a cheap funding currency for global speculators until Japanese rates turned in the past 4-6 years. Policymakers keep doubling down instead of changing course, so the damage @Bogachan_1971 blames on Bank of Japan money printing outpacing a GDP stuck at 1992 levels is by design. x.comÂ
The yen stays weak because intervention cannot fix Japan's deeply negative real rates and a sluggish central bank. Japan deployed up to $95.6 billion over two days, and joint intervention with the US Treasury briefly lifted the yen about 2.8%, but about 85% of that rally has evaporated, with USD/JPY back near 159. The yen has lost 30.6% against the dollar in five years. Intervention did warn speculators off the 160-164 zone, and yen net shorts fell $8.865 billion in a week, the most since 2014. … Show more
The Japanese yen is weakening again despite the coordinated Bank of Japan and US Treasury intervention, having given back about 38% of the manufactured gain. More government intervention looks likely soon as the currency slides. x.com x.comÂ
Japan's intervention may mark a turn higher for the yen, but a surge like past appreciation periods is unlikely because there is no yen carry trade to unwind these days. Japan's near 5% of GDP current account surplus is also less structural than it looks: trade is near neutral, and the surplus comes from large investment income that is usually reinvested abroad automatically. x.com x.comÂ
The yen keeps weakening despite repeated intervention, with dollar-yen back at 156. The US has no choice but to fund as many rescues of the yen as the BoJ wants, since otherwise Japan would be forced to sell its US Treasuries. The BoJ meets on the 18th, and it is unclear what it can even say. x.com x.comÂ
Currency interventions are only a band-aid for the Japanese yen's decline. Treasury Secretary Bessent and the Bank of Japan spent $90B to halt the slide when USDJPY hit 164, and the move has already recovered nearly half. x.comÂ
The yen looks set to keep strengthening against the dollar, because Treasury Secretary Scott Bessent appears determined to push USD/JPY lower. Bessent said in an interview that as "the house" he knows exactly what Japan, the Bank of Japan and its policymakers will do when the US intervenes in the yen, and dared markets to bet against him. As a former fund manager who helped successfully attack the pound and the Thai baht, he holds a real information advantage. x.comÂ
Japan's yen interventions only buy time, so the yen is likely to keep weakening until the Bank of Japan actually moves. Reserves only help while rates stay pinned, and each round costs reserves Japan can't replace while buying less time, making intervention a speed bump for the carry trade. Japan did not save USD/JPY 160 but rented time at it; once 162 prints, the intervention narrative dies. x.com x.com x.com x.comÂ
The yen's intervention-driven rally looks weak and likely to fade, with USD/JPY possibly back near 160 soon. The Fed's EUR/JPY sale came after 4pm on a dead July Friday, signaling weakness speculators will test. Japan is slow-walking supporting policy such as rate hikes or repatriation incentives, and Bessent wants a lower USD/JPY without the US asset drawdown repatriation brings. If USD/JPY fails to regain 160 soon, though, the yen could rally hard, with spec shorts at record extremes. x.com … Show more
Shorting the yen against the dollar makes little sense given Japan's stronger fiscal and external position. Japan's primary deficit is a fraction of the US's, it is cutting energy imports through renewables, holds massive external assets and shows budget wariness, such as refusing Asian Games spending. Meanwhile Trump promises $5,000 per voter for the midterms. Shorting the yen against commodities such as silver is understandable; against the dollar, not. x.com x.com x.comÂ
The US dollar's strength against the yen is a trend, as the Bank of Japan neither wants nor dares to reveal its hand. It is avoiding a clear 160 line and instead trying hit-and-run moves against yen shorts, and it is unclear whether it will actually strike. There is little basis for a sustained yen rally; even if it intervenes, its realistic approach is to fight while retreating, unless Fed policy clearly pivots, and Fed chair Warsh does not seem to want to give markets a clear signal. x.com … Show more
