Yen Breaks 160 as Intervention Risk Rises
The yen has broken through the 160 per dollar barrier, prompting concerns about another round of intervention from Japanese authorities. The currency's decline comes after a record $96.4 billion was spent defending it in July, but this latest move suggests that intervention may not be enough to stem the yen's downward trend.
Despite the central bank's efforts, the yen has continued to slide, with USD/JPY closing at around 160.09 per dollar on Friday before recovering slightly to approximately 159.77 in Tokyo on Monday. This represents a significant reversal from the brief strengthening of the yen that occurred after July's intervention.
The current situation is complicated by the fact that the dollar has strengthened broadly due to higher U.S. interest-rate expectations, making it more challenging for Japan to defend its currency. The Federal Reserve's hawkish stance is also contributing to the yen's weakness, as investors seek higher-yielding assets abroad.
Markets are now pricing in a nearly 90% probability of a Bank of Japan rate hike by September 18, which could provide some support for the yen. However, even if rates rise, it may not be enough to reverse the currency's trend, as the interest-rate differential between the U.S. and Japan remains large.