Yen Weakness Tests Japan's Resolve Amid Rising US Interest Rates

The risk of yen intervention has resurfaced as the Japanese currency continues to weaken against the US dollar. With Japan's holiday season over, the market is once again focused on the closely watched 160-yen-per-dollar threshold, which the yen has approached for two consecutive weeks.

Strategists believe that the Bank of Japan's policy meeting on September 18 accelerated its tightening cycle, but dissent remains within its policy committee. Meanwhile, the Federal Reserve appears to be heading in a more hawkish direction, supporting the US dollar with rising Treasury yields and strong economic data.

Currency strategist Carol Kong at Commonwealth Bank of Australia warned that if U.S. Treasury yields continue to rise and the market tests Japan's resolve to defend the yen, the USD/JPY exchange rate could soon break through 160. She noted that a swift breach of this threshold would increase the likelihood of official intervention.