The US dollar flew higher yesterday evening following the release of the Federal Reserve’s latest monetary policy statement and quarterly Summary of Economic Projections. These were more hawkish than expected, and the probability of at least one 25 basis point rate hike this year rose from 85% from 60% before the announcement.
While there’s a 15% likelihood of ‘no change’ to rates this year, the CME’s FedWatch Tool assigns no probability to any cut in rates. Bear in mind that the market began 2026 expecting at least 50 basis-points-worth of cuts. This renewed dollar strength will be a massive headache for the Japanese government and its central bank.
Earlier this afternoon, the USD/JPY closed in on 161.00, well above 160.73, which was where Japan intervened to support the yen back in April. While they were able to take the USD/JPY back down towards 155.00 in the week following the initial intervention, the yen soon started to sell off again.
The USD/JPY has risen steadily ever since, and now Japanese authorities are warning that they are prepared to intervene again, even though the previous attempt was an expensive failure.
Source: TN Trader
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