USD/JPY finds support near 155.00 after plunging due to probable Japan's intervention

• USD/JPY finds cushion near 155.00 after plummeting from 160.00 on probable Japan's intervention.
• Investors expect Japan's intervention would only provide provisional support to the Japanese Yen.
• The US Dollar finds support on expectations that the Fed will support higher interest rates for a longer period.

The USD/JPY finds provisional support near 155.00 in Monday's early American session. The asset registered a vertical sell-off from historic highs of 160.00, which market participants recognised as an outcome of suspected intervention by Japan's authorities.

However, Japan's top currency diplomat, Masato Kanda, didn't confirm any FX intervention in his speech in the European session. Kanda said, "Speculative, rapid and abnormal FX moves have had a bad impact on the economy, so are unacceptable.". Kanda refrained from providing an appropriate level when asked about what could be the probable zone where the administration could intervene if authorities have not stepped yet.

Prospects of Japan's FX intervention remained high as the Japanese Yen has weakened significantly. The Japanese Yen remained on the back foot despite the Bank of Japan (BoJ) pivoting to monetary policy tightening after maintaining a super-easy monetary policy stance for more than a decade. Though the BoJ has moved its interest rates to a positive trajectory, investors remain worried about the limited scope of policy tightening due to uncertainty over the wage-growth spiral.

The BoJ is moderately moving toward policy normalization, but firm expectations of prolonged policy divergence between the BoJ and the Federal Reserve (Fed) are making it difficult for the Japanese Yen to establish a firm footing.

Meanwhile, the US Dollar rebounds amid uncertainty ahead of the Fed's interest rate decision, which will be announced on Wednesday. The US Dollar Index (DXY), which tracks the US Dollar's value against six major currencies, recovers after discovering buying interest near 105.45. The Fed is expected to maintain the status quo for the sixth straight time and will maintain the argument of keeping interest rates restrictive until it gets confidence that inflation will sustainably return to the desired rate of 2%.