FX Movers: Yen Soars on Intervention Watch; CAD Tumbles on Trade Threats

The currency markets are being whipped by a combination of policy intervention fears and aggressive trade posturing. The Japanese Yen (JPY) has surged to lead the G10 complex, while the Canadian Dollar (CAD) is reeling from existential threats to the USMCA trade agreement.

Tokyo & Washington: A Plaza Accord 2.0?

The Yen's sharp appreciation follows reports of high-level communication between US and Japanese treasury officials aimed at correcting “unwarranted depreciation.” Prime Minister Sanae Takaichis administration has explicitly warned it will combat speculative attacks, and the market is now pricing in a high probability of Bank of Japan (BoJ) policy tightening or direct FX intervention.

• Impact: The unwinding of the popular “Carry Trade” is forcing wide-scale repurchasing of JPY, pressuring USD/JPY lower despite the broad strength of US yields.

Tariff War Hits the Loonie

Meanwhile, the Canadian Dollar is under siege. President Trump‘s threat to levy a 100% tariff on all Canadian imports—retaliation for Ottawa’s potential trade dealings with China—has introduced a massive risk premium into USD/CAD.

• Volkswagen's Warning: The trade friction is spilling over into the real economy. German auto giant Volkswagen has stated it may halt plans for a new US factory if tariff barriers remain high, citing a €2.1 billion hit to costs.
• Oil Support: A redeeming factor for the CAD is the strength in Crude Oil (WTI), which has reclaimed the $61.00 handle on supply concerns. However, the political risk discount on Canadian assets is currently overriding the terms-of-trade benefit from higher energy prices.