Yen Near Year’s Low as Strategists See a Higher Bar for Japan’s Intervention
The yen remains vulnerable to further losses as it hovers near its weakest level against the U.S. dollar this year, with strategists arguing that Japan’s threshold for stepping in to defend the currency has risen.
The yen briefly weakened to 159.24 per dollar on Thursday, nearing the 159.45 level that triggered a so-called “rate check” in January. It was last trading around 158.80.
But the market backdrop has shifted. Higher oil prices tied to the Iran conflict, along with resilient U.S. data, have strengthened the dollar on fundamental grounds—making it harder for Japanese officials to justify intervention if the move is seen as part of broad-based USD strength rather than yen-specific speculation.
“The bar for intervention is higher now,” said Rodrigo Catril, a currency strategist at National Australia Bank. “Our sense is that intervention is unlikely unless we see a disorderly move higher in dollar-yen. The 158/159 area was the old line in the sand, and we suspect a level closer to 162 is where the new line lies.”
Options markets are reflecting a similar shift. One-week risk reversals—a gauge of positioning and sentiment—flipped in favor of the dollar for the first time in five months earlier Thursday.
Japan’s heavy reliance on Middle Eastern energy imports means higher crude prices worsen the trade balance and stoke inflation, which typically weighs on the yen. At the same time, the dollar has benefited from safe-haven flows, reinforcing the move.
That contrasts with January, when the yen’s decline appeared more driven by positioning and speculative momentum. While Finance Minister Satsuki Katayama reiterated earlier this month that the government could act to curb excessive currency moves, including through market intervention, officials have repeatedly emphasized they are focused on excessive volatility rather than defending specific levels.
“Compared with January, U.S. authorities may have less incentive to conduct a rate check,” JPMorgan strategists including Junya Tanase wrote in a note dated Wednesday. “Given that the latest leg higher in USD/JPY has been driven by broad USD strength, it may be difficult to justify intervention even if the pair trades into the 160s,” they said, while maintaining their medium- to long-term USD/JPY forecast at 164.
The yen briefly found support after Prime Minister Sanae Takaichi’s decisive lower-house election victory last month. But it has since weakened following reports that she is cautious about further rate hikes and after she nominated two dovish members to the Bank of Japan’s policy board.
Source : Newsmaker.id
