Yen Plunges Below 160 Amid Rising Intervention Risk and BOJ Rate Hike Bets

The yen continues to weaken against the US dollar, dropping below the level of 160 per dollar and prompting concerns about another round of official intervention. This marks a significant reversal from the previous month's coordinated buying efforts between Japan and the US, which briefly pushed the pair below 155.

Since then, more than half of that appreciation has been erased, leaving traders on high alert for further intervention. However, experts warn that intervention can only provide temporary relief, as the underlying monetary policy differences between Japan and the US remain a significant driver of currency trends.

The Bank of Japan's rate hike bets have surged to 90% probability, with markets expecting a raise by September 18. This would be a significant shift in expectations, with interest-rate swaps now implying that rates will rise even after the October 30 meeting.

Japan has already spent a record $96.4 billion defending its currency over the past month, but experts caution that intervention alone cannot reverse the trend of yen weakness driven by large differences in monetary policy and real interest rates.