Dollar-Yen Heads for 159 as US Rate Hikes and Intervention Jitters Collide
The dollar-yen pair is expected to continue its upward trend in Tokyo foreign exchange trading on October 25, driven by rising U.S. long-term yields and growing expectations of an additional rate hike at the upcoming Federal Open Market Committee (FOMC) meeting.
Rising crude oil prices are also weighing on the yen, with WTI front-month futures reaching $96 per barrel in U.S. trading on October 24, raising concerns about deterioration in Japan's trade balance and exerting downward pressure on the yen.
The prevailing view in the market is that the Japan-U.S. interest rate differential will remain wide for the time being, with the U.S. 10-year Treasury yield climbing to 5.22% on October 24, its highest level since June 2007, following hawkish comments from Federal Reserve officials.
However, market participants are acutely aware of intervention risk at the 159-yen level and have little choice but to exercise caution in chasing the upside, as the likelihood of dollar-selling, yen-buying intervention by Japanese monetary authorities is intensifying.