Global FX Trader Policy Pushback

Economics Research 31 July 2026 | 10:08PM BST

Our thoughts on JPY, USD, GBP, BRL, EM Carry, CHF & IDR Kamakshya Trivedi | n JPY: Japan goes big and the US helps. Japan’s latest apparent intervention took Goldman Sachs International a maximal approach, leaning into some negative developments for the Dollar Michael Cahill with a combination of what appears to be substantial selling of USD/JPY—BoJ | Goldman Sachs International accounts suggest it is on the high end of historical operations—together with reported US “rate checks” followed by US intervention. These actions following Danny Suwanapruti | Japanese intervention serve as a signal of support for the Yen vs both the Dollar Goldman Sachs (Singapore) Pte and Euro in an effort amplify Japan’s more substantive operations. Nevertheless, Teresa Alves | the market response looked to be on the lower end of historical averages, in our Goldman Sachs International view demonstrating the diminishing (but still meaningful) returns on intervention Karen Reichgott Fishman when Yen depreciation is broadly in line with macro and market fundamentals. It | seems likely that authorities would intervene further in coming days if the Yen Goldman Sachs & Co. LLC

begins to unwind the recent move, as was the case in May of this year. And we Stuart Jenkins | continue to think intervention is an effective tool for authorities to buy some Goldman Sachs International time before fundamental factors turn more positive. That said, as in April, we Victor Engel think gradual BoJ hikes are unlikely to sustainably strengthen the Yen. Just as was | the case then, the market has already mostly priced a rate hike in the next couple Goldman Sachs International

of meetings. Incrementally stronger language on upside inflation risks in this Lexi Kanter | morning’s BoJ statement and press conference appear modest to us compared Goldman Sachs & Co. LLC to this relatively high hurdle for monetary policy to dictate the path ahead for the Yen. Outside of a change in either the policy mix or global growth outlook, we think encouraging repatriation would be the most powerful policy for influencing the currency over a long period of time. Japan’s substantial international capital holdings separate it from historical examples of currency crises, and the shift in Japan portfolio flows over the last decade goes a long way to explaining why the currency has consistently traded cheap to fair value. Reversing that trend would likely have a strong and durable effect on the currency. However, this comes with clear trade-offs, especially when Japanese investors have been well-rewarded for their increased foreign allocation.

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Goldman Sachs Global FX Trader

Exhibit 1: The pattern of price action following this week’s intervention closely resembles that of the April 30 episode

USD/JPY USD/JPY Price Action USD/JPY 161 164

160 30 July - 31 July (Right) 163

155 158 00:00 10:00 20:00 06:00 16:00 01:00 11:00 21:00 07:00 17:00

Source: Bloomberg, Goldman Sachs Global Investment Research

n USD: Rolling with the holding. Policy and data developments this week were modestly negative for the Dollar. That said, we think it should be only a modest headwind and maintain our view that the Dollar should be sturdy against low-yielders in the G10 while high-yielding currencies have more room to perform. That is mostly because FX volatility is low, and we do not see the conditions for a near-term breakout, so things should stay pretty close to home until we see more definitive evidence of growth worries or divergent policy outcomes. In this context, it also matters that the Fed policy “surprise” this week was quite large in terms of the policy rate decision, but much more modest in terms of terminal pricing and cross-asset moves. Consistent with this, the FX market unwound part of the June surprise (Exhibit 2). From here, we do not think investors should press on dovish Dollar down trades unless the inflation data give a clear signal to do so. We see some echoes of…