Well, if something can’t go up on good news.. there’s bound to be trouble up ahead. And the Japanese yen is quickly finding that out already with another drop today that sends it to a one-year low against the US dollar. I warned about the situation yesterday already here: The dollar isn’t the only major currency having a bad day
The latest drop in the yen currency now takes the pair up to 158.70 levels, its highest since January last year. The high earlier briefly clipped 157.91, which would mark the highest since July 2024. Pain.
USD/JPY daily chart
The 160.00 mark is the more obvious threshold to watch out for and a key psychological one at that.
However, the rapid pace of decline in the yen is also something to take note of. We’re already seeing Tokyo officials come out to try and intervene verbally with some jawboning language. But evidently, that doesn’t look to be enough to deter yen shorts.
In any case, the closer we are to the 160.00 threshold is definitely a signal that will invite Japan’s ministry of finance to potentially intervene to keep markets in check. As a reminder, the last time they did so was back in late April and during May 2024. Before that, they last intervened to buy the yen back in September to October 2022 – which was the first yen-buying intervention in 24 years.
The issue with any intervention now is that the fundamentals aren’t going to change. The “Takaichi trade” is well and truly on and it dictates that the path of least resistance is still for a weaker currency. That amid pressure on the BOJ to not hike rates as Japan’s fiscal expansion continues to see its debt levels soar through the sky.
On the bright side, there’s at least one good thing out of this I guess. And that is any yen carry trade implosion is pushed further away, for now.
