Key Moments
-
USD/JPY climbed to around 158.70, marking its strongest level since
January last year. -
Meanwhile, Japanese officials increased verbal warnings, but selling
pressure on the yen continued. -
At the same time, traders are watching the 160.00 level, a key
psychological threshold that may prompt action from Japan’s Ministry
of Finance.
USD/JPY Extends Gains as Yen Weakens
The Japanese yen continued to lose ground against the US dollar on Tuesday.
USD/JPY rose to around 158.70, testing a one-year high. Earlier, the pair
briefly touched 157.91.
That move marked the strongest level since July 2024. As a result, it
highlighted the pace and scale of the yen’s recent decline.
Markets Eye the 160.00 Level
Market participants now focus on the 160.00 area. This level stands out
as a key psychological barrier for USD/JPY.
Moreover, the rapid pace of yen weakness has raised concerns. For now,
the broader trend still points toward further depreciation.
As prices approach this round number, traders are watching whether the
pair can extend gains. Such levels often attract both speculative flows
and official attention.
Official Warnings and Intervention Risk
In response to the sharp decline, Japanese officials stepped up verbal
intervention. They issued warnings aimed at slowing yen selling.
However, those comments have so far failed to shift market positioning.
Short yen positions remain firmly in place.
As USD/JPY nears 160.00, speculation about direct intervention is growing.
Japan’s Ministry of Finance last intervened in late April and May 2024.
Before that, authorities bought yen between September and October 2022.
That episode marked Japan’s first yen-buying action in 24 years.
Policy Backdrop Still Favors Yen Weakness
Even if intervention occurs, the broader backdrop remains difficult for
the yen. The so-called “Takaichi trade” continues to dominate market
thinking.
In addition, pressure remains on the Bank of Japan to avoid rate hikes.
Japan’s fiscal expansion and rising government debt add to the strain.
As a result, fundamental forces still point to downside risk for the yen.
Short-term policy action may slow the move, but it may not reverse it.
Carry Trade Risks Remain Delayed
One consequence of prolonged yen weakness is a delay in carry trade
unwinding. Yen-funded carry positions remain largely intact.
For now, the risk of a sudden “yen carry trade implosion” appears pushed
further into the future.
Key Levels and Policy Context
| Item | Detail |
|---|---|
| Latest USD/JPY level | 158.70 |
| Earlier high | 157.91 (highest since July 2024) |
| Key psychological level | 160.00 |
| Most recent interventions | Late April and May 2024 |
| Previous yen-buying period | September–October 2022 |
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