Dollar-yen pulls back after early climb to near five-week high

Earlier in the day, USD/JPY made a firm push above 160.00 and touched 160.40. That was the highest level since 31 July, when the US and Japan acted jointly to defend the yen.

A pullback came after that, but USD/JPY has now fallen quickly to 159.60 in the past 20-25 minutes.

Could this be a rate check from Tokyo once more? Or are these just nerves, as traders fear overstepping boundaries and inviting action from Washington and/or Tokyo again?

Both possibilities are real, and if it is the former, the action certainly looks less effective this time around. With good reason.

Since April, Japan's intervention efforts have arguably not been executed with much finesse.

This point was made back in May:

The main thing about intervention isn't so much so as the money but more so about the signaling. You want enough players in the market to get that signal and amplify it, so as to get the idea that "we shouldn't mess with the MOF/BOJ". Otherwise, that signal can get lost in translation if there isn't enough liquidity follow through. And at the end of the day, it might just be passed off as more noise than an actual leading signal to traders.

The timing of Japan's intervention moves leaves much to be desired. But the authorities are up against a difficult backdrop, with fundamentals running against the yen in nearly every direction.

This week, global bond yields are once again pushing higher, trying to make a break for it. That is not a backdrop to oppose, because it likely means revisiting the same conversation within weeks.