Japan fired its yen bazooka twice in a week — spending an estimated $65 billion in intervention after USD/JPY breached 160 — dragging the pair back toward 155, which gives our short USD/JPY thesis an intervention floor that the carry-funded crowd has to respect. Brent crude crashed 8% to $101 on Wednesday after reports the U.S. and Iran were nearing a 14-point deal to end the war and reopen the Strait of Hormuz, though prices bounced Friday after fresh exchanges of fire in the strait — the oil volatility cuts both ways for our SGD longs and JPY cross shorts. Trump escalated the EU trade fight by threatening 25% auto tariffs and setting a July 4 deadline for the Turnberry deal, adding direct downside pressure to EUR and reinforcing our short EUR/SGD position.
Japan's MOF has burned through $65 billion in intervention ammunition and can only fire twice more under IMF rules — meaning the BOJ rate path is now the only sustainable yen defence, and the market hasn't priced what that implies for June.
Three themes driving G10 FX
- Intervention vs. normalisation — Tokyo's FX intervention is a stopgap that accelerates the political pressure on the BOJ to hike in June, compressing JPY cross differentials faster than consensus expects.
- Hormuz binary — Brent oscillating between $96 and $114 in a single week means every SGD, CHF, and JPY position carries embedded oil optionality that carry models cannot capture.
- Transatlantic fracture — Trump's auto tariff escalation and July 4 ultimatum create a EUR-specific headwind that separates it from the broader USD-weakness trade, favouring SGD over EUR as the anti-dollar expression.
Our top 3 trades
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Short USD/JPY BOJ's 6-3 hawkish dissent meets a fractured Fed — rate convergence compresses the 287bp gap while MOF truncates upside at 160. Carry: −287bp (headwind) |
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Short USD/SGD The widest bilateral current account gap in the universe — 20.5pp — meets MAS slope tightening and AI-electronics export demand. Carry: −260bp (headwind) |
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Short EUR/SGD Eight of ten strategic factors bearish, none bullish — eurozone services PMI at 47.4 constrains ECB delivery against clean MAS tightening. Carry: −85bp (headwind) |
On our radar
| May 12 | US April CPI | Affects: USD/JPY, USD/SGD, EUR/SGD |
| May 12 | BOJ Summary of Opinions (April MPM) | Affects: USD/JPY |
| May 15 | Powell-Warsh Fed Chair transition | Affects: USD/JPY, USD/SGD, EUR/SGD |
| May 25 | Singapore April CPI | Affects: USD/SGD, EUR/SGD |
Monday's double-header — US CPI and the BOJ Summary of Opinions releasing within hours of each other — carries the highest asymmetry because a cool CPI print plus hawkish Summary showing four or more members supporting a June hike would simultaneously accelerate both our USD/JPY short and the broad USD-weakness thesis, while a hot CPI could trigger violent short-covering across the most crowded USD-short positioning in a decade.
Carry snapshot
All three top trades bleed carry — USD/JPY at −287bp, USD/SGD at −260bp, and EUR/SGD at −85bp are each paying to hold. Carry is broadly not compensating in this regime: only 6 of the top 14 aligned trades have carry supporting the direction, and among our top 8 by expected value, only SGD/CHF has carry aligned. This is a conviction market, not a carry market — position sizing needs to account for the daily drag rather than rely on it.
Full analysis with all pair rankings, carry landscape, risk dashboard, and catalyst calendar available for Edge and Dossier members.