USD/JPY Breaches 158 as Japan's Record Intervention Fails
US Dollar climbs past 158 yen despite Japan spending a record 15.4 trillion yen. Fed rate hike talk drives the yen lower.
Key points
- USD/JPY trades above 158.00, reversing the yen's recent rally. The pair is on track for its first daily close above the 200-day average since September 2.
- Japan spent a record 15.4 trillion yen buying currency from July 30 to August 26. This outpaced the 11.7 trillion yen spent in April and May combined.
- The Bank of Japan's new 1.25% rate applies Thursday. The Fed is at 3.75-4.00%, and Governor Barr argued for more increases, keeping the dollar strong.
USD/JPY trades above 158.00, reversing recent yen gains. This shift occurs as US Federal Reserve officials suggest higher rates. The 200-day moving average, previously a ceiling, now supports the dollar. FXStreet notes the currency pair is on track for a key daily close.
Japan’s Finance Ministry spent 15.4 trillion yen buying currency between July 30 and August 26. This amount exceeds the 11.7 trillion yen spent in April and May. The US Treasury also intervened on July 31. These efforts kept the dollar below 160.00 for four weeks.
Record spending fails to hold yen
The yen weakened despite the massive financial injection. Trading resumed above levels seen during the July intervention. Dealers returned to a market where the dollar held firm. The previous intervention point was near 164.00.
Japanese markets closed for national holidays starting Monday. They reopen on Thursday, when new Bank of Japan rates apply. Officials checked rates with dealers on September 18. This step usually precedes currency purchases by the government.
Rate gap drives capital flows
The Bank of Japan raised rates to 1.25% on September 18. The vote was 7-2 in favor of the increase. This is the highest level since 1995. The new rate takes effect this Thursday. The US Federal Reserve maintains rates between 3.75% and 4.00%.
Governor Barr argued for further increases on Wednesday. Borrowing yen at 1.25% to buy dollars earning near 4% remains profitable. This interest differential encourages traders to hold dollars. The US Treasury Secretary claimed knowledge of the next BoJ move on September 8.
Key levels define next move
Resistance sits at 158.50, the Wednesday high. Above that, 159.00 marked the late August trading range. The 160.00 level triggered the early September drop. Support now lies at 158.00, which turned into a floor.
The 200-day EMA just above 157.50 has capped closes since September 2. A break below 157.00 would end the current upward trend. The Stochastic RSI indicator sits near 40 and is rising. Traders watch for a close back under 157.00.
