Overnight, the USD/JPY hit its highest level since the last day of April, just after Japan’s authorities intervened to support the yen. Overnight, the USD/JPY pushed above 159.60 before pulling back a touch. Analysts believe that there could be another round of intervention should the USD/JPY push back above 160.00.
Source: TN Trader
The Japanese currency has several issues with which it has to deal. Firstly, there is the strength of the US dollar. The continued uncertainty over the US/Iran war has helped to keep a bid under the dollar as investors have increased their exposure as a ‘flight to safety’. In addition, investors have gone from expecting two rate cuts at the beginning of this year to at least one rate hike by the end of it.
Domestically, the Bank of Japan is also expected to raise interest rates this year. But offsetting this, and weighing on the yen, is the additional fiscal stimulus coming from Japan’s government under Prime Minister Sanae Takaichi. Economists are very concerned by her promise of unfunded tax cuts and the strain this will put on Japanese Government Bonds.
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