Prime Target: Carry Trades - except for the USDJPY!Sure, the Yen is overly weak on a trade-weighted basis BUT it is the least weak versus the USD!
E.g., For any intervention to be effective it ought target just about any other high yielding spread/pair EXCEPT for the USD!
Having established that, it is still far more likely that any intervention would target the USD/JPY directly than the rest, if for no other reason but for its success last September (2022). (Last September, dollar longs were extremely overcrowded which amplified the effects of that intervention, and then most of the cash went into carry trades.)
Times have changed, though, whether the BoJ will be willing to subscribe to that notion or not. (which is yet to be seen).
OK, so where does this potential paradox (or rather, just a dichotomy? ;-) leave one, in trading terms?
1) If there ever was a right time to trade the Japanese Yen against a basket of it's counterparts, now would be it! (Work has almost completed on just such a basket this time with correct weighing. ;-)
2) FX options (especially Gamma changes) have been gauging the potential market effects of the BoJ's various jaw-boning attempts (most of which were summarily ignored by the markets) in support of the Yen, rather accurately. "If it ain't broke don't fix it." Stick with it!
p.s. The CHF/JPY is a special case here (not quite a carry trade) as it's eye-watering rise is due to the same, deranged SNB policy which ended in tears, back in 1978-79. (... Switzerland slipping into a far deeper depression than it's trading partners, back then.)
