mmerzbank analyze the pair’s outlook. Market assumption that 150 constitutes the MOF’s line of defense can turn into a self-fulfilling prophecy The extremely small distance of the exchange rate to 150 constitutes a sign that the exchange rate fundamentally justified from the market’s point of view is much higher than 150.
If the MOF were to not intervene after a serious breach of 150, we would have to expect a very, very significant jump of the JPY exchange rates. That is not likely to be what the MOF wants. As a result, it will have no choice but to take action when a serious breach of 150 arises. The market assumption that 150 constitutes the MOF’s line of defense can turn into a self-fulfilling prophecy.
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