The Japanese yen remains under significant pressure, with geopolitical tensions and speculative trading pushing the currency lower. ING’s FX strategist Francesco Pesole warns that the Bank of Japan may intervene, especially given the thinner market conditions during the US Thanksgiving week.
Taiwan Tensions Add to Yen Weakness
Pesole notes that the yen continues to stand out in G10 FX as traders probe how far Japanese authorities are willing to tolerate further depreciation. News that President Trump and President Xi discussed Taiwan during a recent call has added to the strain on JPY.
The ongoing diplomatic friction between Japan and China over Taiwan is also contributing to market nervousness, with investors pricing in additional risk premia due to the potential economic impact of any retaliatory steps from Beijing.
With markets running on reduced liquidity over the holiday period, Pesole adds that conditions may be favorable for a Bank of Japan intervention in USD/JPY, ideally following a natural pullback in the exchange rate.
