Yen Falls to Intervention Line Again Amid Rate Gap and Rising Tensions

The Japanese yen has been testing its intervention line of 160 again, after speculators resumed selling in the absence of follow-up intervention from Tokyo. The USDJPY traded around 159.3 to 159.4 on August 14, with the yen set to lose nearly 1% for the week.

The Bank of Japan's 0.75% policy rate has created a wide gap between it and the Federal Reserve's 3.50% to 3.75% under Chair Kevin Warsh, keeping funding the yen carry trade alive. However, rising bond yields, fiscal deficits, and Iran war-driven energy costs add complexity.

On August 13, Bloomberg reported that Prime Minister Sanae Takaichi's government is supportive of a near-term Bank of Japan rate hike, with policymakers likely to act in either September or October.