USD/JPY Exchange Rate Rebounds as Market Tests Authorities' Tolerance
The USD/JPY exchange rate rebounded from 155 to 159 after joint intervention by the US and Japan, according to Westpac. The bank believes that the market is actively testing the authorities' tolerance thresholds, and that without further measures, the yen may continue to weaken.
Westpac pointed out that the rapid reversal of the USD/JPY pair suggests that the market is probing the boundaries of what the US and Japanese governments are willing to tolerate. This dynamic typically keeps volatility elevated but does not necessarily reverse the underlying trend.
The bank's medium-to-long-term assessment remains cautious, with expectations that the yen will struggle to initiate a sustained upward trend before the anticipated shift in US monetary policy later in 2026. Westpac forecasts that the USD/JPY exchange rate will only decline to 154 by the end of 2027 and further drop to 146 by the end of 2028.