Japanese Yen struggles near 160.50 as intervention fears offset US Dollar strength
USD/JPY struggles for direction on Thursday as fears of intervention by Japanese authorities cap upside, even as the US Dollar (USD) strengthens amid renewed hostilities between the United States and Iran.
At the time of writing, the pair is trading around 160.50, a level that previously triggered intervention from Tokyo in late April. Japanese authorities have repeatedly signaled their readiness to take decisive action against excessive and disorderly currency moves.
On the geopolitical front, US President Donald Trump warned of further strikes against Iran as tensions escalated earlier this week after Tehran downed a US Apache helicopter near the Strait of Hormuz.
However, diplomatic efforts remain underway. Reuters reported on Thursday, citing Iranian and Western sources, that Tehran and Washington are still exchanging messages over the details of a memorandum of understanding, including mechanisms for the release of frozen Iranian funds.
The latest flare-up has cast doubt on the durability of the ceasefire announced in April and dented hopes for a near-term peace deal. This keeps geopolitical risks in play and supports safe-haven demand for the US Dollar.
The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, is trading around 100.23, its highest level since April 6.
The Greenback is also drawing support from hawkish Federal Reserve (Fed) expectations as the inflation outlook deteriorates amid the ongoing energy shock.
Data released on Thursday showed the Producer Price Index (PPI) rose 6.5% YoY in May from 5.7% in April, above market expectations of 6.4%. Meanwhile, data released on Wednesday showed Consumer Price Index (CPI) inflation accelerated to 4.2% from 3.8%, the highest level since April 2023.
Still, underlying inflation pressure remained relatively contained. Core PPI held steady at 4.9% YoY in May, below the 5.4% forecast, while Core CPI edged up to 2.9% from 2.8%.
Apart from US Dollar strength, elevated Oil prices remain a drag on the Japanese Yen (JPY) in the near-term, given Japan's reliance on imported energy from the Middle East.
Meanwhile, the BoJ's gradual approach to policy normalization keeps the interest rate gap with other major central banks wide, a persistent headwind for the Yen.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
Federal Reserve meeting minutes turn "hawkish"! Most officials support another rate hike this year, US dollar continues to rise
The latest minutes released by the Federal Reserve show that all 19 officials support a rate hike in September, and most participants believe that further interest rate increases may still be needed before the end of the year.
High yields on US Treasuries start attracting buyers; $39 billion 10-year Treasury auction sees strong demand as long-end yields give back gains
U.S. Treasury bonds showed mixed performance on Wednesday after a $39 billion 10-year Treasury auction saw strong demand, indicating that as yields reach multi-decade highs, some major investors are starting to re-enter the market.
Overnight U.S. Stocks | Federal Reserve officials expect another rate hike before the end of the year, three major indexes closed lower, Micron Technology (MU.US) rose 4%
At the close, the Dow Jones Industrial Average fell by 341.41 points, down 0.66%, to 51,179.87 points; the S&P 500 Index dropped by 17.20 points, down 0.22%, to 7,801.73 points; and the Nasdaq Composite Index declined by 61.20 points, down 0.22%, to 27,538.69 points.
Federal Reserve meeting minutes: All 19 policymakers support a rate hike in September, but reasons vary; most expect further hikes this year, suggesting no urgency in October.
Most officials view a September interest rate hike as an "insurance" measure against stubborn inflation; a minority see it as a necessary step to curb inflation. Overall, there is no indication of a desire to push for consecutive rate hikes. The "New Fed News Agency" emphasized the minutes: "Most participants believe that it may be appropriate to raise interest rates again before the end of the year." Nearly all officials believe inflation remains elevated and the labor market is close to full employment. Many noted that, despite the rise in long-term U.S. Treasury yields, financial conditions are still conducive to economic growth. Some officials believe that AI will boost investment and productivity, but may also contribute to inflation. The minutes revealed that the U.S.-Japan joint intervention in July to support the yen was a U.S. Treasury action, with no Federal Reserve funds used.
Crypto prices
More
