USD/JPY Nears 164, Threat of Japanese Intervention Limits Gains
USD/JPY fell slightly on Friday (July 24th) as market participants began to be cautious about the possibility of Japanese government intervention. Despite the weakening, the currency pair remained near its four-decade high of 164.00.
The yen remained under pressure due to the divergence in interest rate policies between Japan and other developed economies. Although the Bank of Japan has raised interest rates to 1%, borrowing costs in Japan remain significantly lower than in the United States.
Pressure on the yen also increased due to the Middle East conflict disrupting energy supplies. The United States continued its attacks on Iran for the 13th night, while Iran and its allies retaliated by attacking US-linked military assets in Kuwait, Bahrain, and Jordan.
Supply risks intensified after the Houthi group attacked two Saudi oil tankers in the Red Sea. The disruption occurred amid the closure of the Strait of Hormuz and pushed oil prices to their highest level since June 11th.
Rising energy prices fueled inflation concerns and reinforced expectations of tighter Federal Reserve policy. US jobless claims data, which fell to its lowest level since September 1969, also indicates a robust labor market.
The strength of the dollar and the interest rate differential mean that USD/JPY still has the potential to continue rising. However, potential Japanese intervention and a cautious stance ahead of next week's FOMC meeting could limit the pair's movement. (arl)
Source: Newsmaker.id
