COMMENT-USD/JPY 160: More than a line in the sand for Japan?

The 160 level might shift from a line in the sand to a "maximum exchange rate" for USD/JPY in May - barring an ultra-hawkish hold from the Federal Reserve this week, courtesy of yen price action on Monday.

The yen tide turned after USD/JPY washed up against 160 on Monday, with 154.40 marking the subsequent EBS low water-mark on suspected yen-buying FX intervention by Japanese authorities.

Japan's top currency diplomat Masato Kanda on Monday said current developments in the FX market were "speculative, rapid and abnormal", and that they could not be overlooked.

CFTC data on FX positioning showed the net JPY short rose for a sixth consecutive week to a new 17-year high of 179,919 contracts before USD/JPY vaulted 155 last week.

The biggest risk to 160 being a USD/JPY cap in May is if Fed chief Jerome Powell unexpectedly suggests on Wednesday that the next Fed interest rate move could be a hike rather than a cut.

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