Dollar-Yen Rebounds as Traders Reassess Intervention Risk

Key Moments

USD/JPY fell from 159.00 to 153.30 before stabilising at key support near the 100-day moving average.
Meanwhile, broad dollar weakness and strong rallies in gold and silver have capped further upside in the pair.
Even if the Ministry of Finance intervenes, structural pressures linked to Japan’s fiscal policy are likely to remain.

Technical Floor Holds After Sharp Selloff

The Japanese yen has stayed in focus this week after signs that Tokyo officials carried out a “rate check” on Friday. As a result, upward momentum in USD/JPY faded. The pair reversed from 159.00 and dropped to 153.30.

However, the selloff stalled at a key technical level. Buyers stepped in near the 100-day moving average, shown by the red line on the daily chart. At the same time, traders continued to assess the risk of direct Ministry of Finance (MOF) intervention. For now, this level has formed a clear short-term floor.

Macro Drivers: Dollar Retreat and Precious Metals Surge

Dollar weakness has also limited USD/JPY since Friday. The U.S. currency has slipped against major peers. Consequently, pressure on the yen has eased.

At the same time, precious metals have surged. Gold and silver jumped sharply and now trade near elevated levels. Both followed near-parabolic moves earlier in the week.

Still, rapid moves often invite caution. When markets move too far and too fast, corrections tend to follow. Therefore, traders remain alert to the risk of pullbacks in both currencies and metals.

Policy Uncertainty and the Limits of Intervention

On the policy front, uncertainty remains high. Traders are still interpreting last week’s rate check. Even so, many believe the MOF will eventually step in with direct action.

The bigger question is whether intervention would change the broader trend. In short, the answer appears to be no.

Fiscal Stance, BOJ Policy, and the “Takaichi Trade”

Japan’s structural outlook depends heavily on politics and policy. If Takaichi stays in power and pushes more expansive fiscal plans, pressure on the yen should persist. Meanwhile, she has also signalled caution on further Bank of Japan rate hikes.

As a result, the so-called “Takaichi trade” remains intact. Investors continue to focus on Japan’s fiscal deterioration. Consequently, the yen stays vulnerable, even when officials act.

Factor	Implication for JPY
Expansive fiscal policies	Sustained pressure on the yen and bond market
Limited BOJ rate hikes	Reduced monetary support for the currency
Investor focus on fiscal risks	Ongoing selling pressure on yen and JGBs

Historical Lesson: Previous Intervention and Market Pushback

MOF intervention can still offer short-term relief. Direct action may push USD/JPY lower for a time. However, past experience shows the limits of this approach.

In July 2024, USD/JPY rose above 160.00. Intervention then drove the pair down to 140.00 by September. Yet by January 2025, it had climbed back to 158.00.

This pattern highlights the challenge Tokyo faces. Structural forces remain strong. As the article notes, pushing back against markets is no easy task.