Chris Turner at ING notes that a near 1% drop in USD/JPY within minutes, followed by another slide, sparked talk of renewed Japanese intervention after the Bank of Japan’s earlier $96 billion sales. Authorities appear satisfied with price action, but Turner says a likely Fed hike in mid-September should keep USD/JPY supported unless the Bank of Japan turns much more hawkish.

Authorities watch sharp Yen moves

“The near 1% fall in USD/JPY over a couple of minutes yesterday afternoon, and another slide overnight, sparked talk of another round of intervention.”

“This follows the $96bn sold by the Bank of Japan in late July/early August. Traders seemed to doubt that this was an intervention, given the lack of dislocation in the FX electronic matching systems at the time.”

“US and Japanese authorities must be satisfied by yesterday’s price action and keen to encourage a sense of urgency for those long USD/JPY and EUR/JPY above 160 and 186, respectively.”

“That said, a Fed hike in mid-September looks likely to keep USD/JPY relatively bid this month and any sustainable turn lower in USD/JPY now probably requires a much more hawkish Bank of Japan and some new initiatives to encourage domestic investment in Japan.”