The Japanese yen (JPY) weakened against the US dollar (USD) on Thursday to a near two-year low, with the USD/JPY pair hitting 161.81, its highest level since July 2024’s annual high of 161.95, driven by hawkish Federal Reserve (Fed) and a jump in US Treasury yields. At the time of writing, the pair recorded a solid gain of 0.48%.
USD/JPY weakens as Fed reassessment revives fears of intervention
USD/JPY had already crossed the intervention zone after hitting a high of 160.73 on April 30, the day after Japanese authorities pulled the pair down 385 pips and ended the day at 156.59. Since then, the pair has enjoyed a surge of more than 487 pips to refresh multi-year highs. Worth noting is that if the pair surpasses 162.00, it will refresh almost 40-year highs, with the next resistance seen at the December 1986 monthly high of 163.36.
Market sentiment has improved after the Fed’s dovish stance left rates unchanged at 3.50%-3.75% on Wednesday and indicated that nearly half of the FOMC board expects at least one rate hike in 2026. The new Fed Chairman, Kevin Wersh, refrained from expressing his views on monetary policy.
At his press conference, Warsh said that forward guidance is not “well-suited” to current economic conditions, though he added that the jobs market is moving in the right direction and that price stability is the Fed’s priority. Meanwhile, currency markets are expecting a tightening of at least 34 basis points by the end of 2026, according to data from the Chicago Board of Trade (CBOT).
US data showed that initial jobless claims for the week ending June 13 fell from 230K to 226K, slightly above estimates of 225K, yet the labor market appeared to be improving.
Along with the Fed’s policy change, investors are applauding the US-Iran deal, which is generally unfavorable for safe-haven currencies like the yen. Meanwhile, Japan’s Chief Cabinet Secretary Minoru Kihara said, “We are prepared to respond appropriately to currency moves at any time as needed.”
Last week, Finance Minister Satsuki Katayama warned that authorities were “always prepared to take decisive action.” The top currency diplomat, Atsushi Mimura, has been silent since early May after the April 30 intervention.
This week, the Bank of Japan (BOJ) raised interest rates to 1%, yet the yen failed to post gains, offset by rising US Treasury yields and improving investors’ risk appetite.
USD/JPY Price Forecast: Technical Outlook
In the daily chart, USD/JPY traded at 161.64, extending its lead above the cluster support formed by the Triple Simple Moving Average around 159.09 and the reclaimed trend-line floors near 157.17 and 154.05, which together indicate a strongly bullish near-term bias. The pair is also holding on to horizontal support at 160.00, while the Relative Strength Index (14) remains in overbought conditions at around 71 points, indicating that the upside momentum remains strong but is increasingly vulnerable to a corrective pullback.
On the downside, initial protection is seen at the 160.00 horizontal level, followed by the triple simple moving average around 159.09, where buyers may try to re-establish control as the downside unfolds. A deep retracement towards the former trend-line break zone near 157.17 and 154.05 would still keep the broader uptrend intact, but would require a sustained close below these supports to weaken the current bullish structure.
(The technical analysis for this story was written with the help of AI tools.)
Japanese Yen FAQ
The Japanese Yen (JPY) is one of the most traded currencies in the world. Its value is largely determined by the performance of the Japanese economy, but more specifically by the policy of the Bank of Japan, the difference between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are important for the yen. The BOJ has occasionally intervened directly in currency markets to lower the value of the yen, although it often avoids doing so due to political concerns of its main trading partners. The BoJ’s extremely loose monetary policy between 2013 and 2024 caused the yen to depreciate against its main currency peers due to increasing policy differences between the Bank of Japan and other major central banks. Recently, the gradual end of this ultra-loose policy has provided some support to the yen.
Over the past decade, the BOJ’s stubborn stance on ultra-loose monetary policy has led to increased policy differences with other central banks, particularly the US Federal Reserve. This led to a widening of the gap between 10-year US and Japanese bonds, which supported the US dollar against the Japanese yen. The BOJ’s decision to gradually abandon ultra-loose policy in 2024, coupled with interest rate cuts at other major central banks, is narrowing the gap.
The Japanese Yen is often viewed as a safe investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its perceived reliability and stability. The value of the yen is likely to strengthen against other currencies considered riskier for investment in turbulent times.
