USD/JPY Steps on the Gas as Election Uncertainty Strengthens
The USD/JPY looks increasingly difficult to contain. Markets are once again abuzz with the possibility of a snap election in Japan, and the political risk premium has resurfaced. Coupled with lingering diplomatic tensions between Japan and China, pressure on the yen is mounting, pushing USD/JPY to continue rising, approaching a key psychological area.
Intervention concerns could indeed slow the rate, but the 160 level remains a highly likely test. Considering that in July 2024, Japan allowed USD/JPY to break through 160 and only intervened when it approached 162. This means that the Japanese authorities' tolerance threshold may still be quite loose, especially if the Bank of Japan has not yet issued a firm signal.
However, intervention alone is considered insufficient to permanently reverse the trend. Previous experience shows that truly sustained declines in USD/JPY occur when US yields also fall significantly, not solely due to intervention. Meanwhile, Japan's domestic political risks are making the market hesitant to price in a BoJ interest rate hike in the near future—making the yen vulnerable to further pressure. (alg)
Source: Newsmaker.id
