The pound/yen exchange rate has dropped almost 350 pips from its earlier weekly high of around 214.20-214.25, following rumors of government intervention aimed at supporting the Japanese yen (JPY). However, the spot price recovered quickly from about 210.75 and has been hovering around 212.65-212.70 in the early European trading session.
Recent data from the Bank of Japan (BoJ) indicates that the Ministry of Finance (MOF) invested roughly 5.48 trillion yen (around US$35 billion) to bolster the yen after it fell past the key psychological level of 160.00 against the US dollar (USD). Traders seem to be on edge, holding out hope that Japanese authorities might step in again to stabilize the currency. This anticipation was a significant factor behind the sharp decline in the pound/yen pair today.
Nonetheless, JPY enthusiasts appear hesitant to make bold moves until there’s some kind of formal acknowledgment of intervention. On another note, the prospect of a possible peace agreement between the US and Iran seems to enhance the JPY’s appeal as a safe-haven asset compared to the UK. Moreover, signals from the Bank of England (BoE) suggesting potential rate hikes if inflation continues could limit the downside for the GBP/JPY cross.
From a technical standpoint, the spot prices have shown some strength below the 100-day simple moving average (SMA). So, it might be wise to confirm whether the GBP/JPY cross has indeed hit a peak, and perhaps wait for a solid follow-through before making decisions about continuing the recent decline from the 216.60 area, which was the highest since January 2008 that was reached last week.
