The Japanese Yen began a contrarian Monday on the offensive, even though it only maintained some of its intraday peak versus the US Dollar. This may sound like a small step — and on the surface, it is — but the thinking behind it goes much further. A combination of global tensions, conservative central bank language, and renewed fears of government interference has, however, quietly herded demand back toward the Yen.
Why the Yen Is Finding Support Now
A return of risk-aversion appetite is one of the main factors driving Yen strength. Global risks have not faded. In fact, they have widened. US tensions with Venezuela are back. And concerns escalated about the Israel–Iran situation also remain unsettled. And the long-simmering war between Russia and Ukraine continues to cloud the picture.
In such circumstances, investors typically seek out currencies considered safer than other options. The Yen tends to be the beneficiary at such times, and this time has proved no exception.
Comments from Atsushi Mimura, Japan’s top foreign exchange official, lent further support. He cautioned against sudden one-way moves in the Yen and suggested that authorities may take action if the currency weakens too quickly. The mere reminder was sufficient to revive fears of intervention and put the brakes on Yen selling.
Central Banks, Bonds, and What Comes Next
Attention is also on the Bank of Japan. It recently increased its policy rate to 0.75 per cent, the highest in three decades. Governor Kazuo Ueda left the door open to further tightening, but refrained from setting a clear timetable. This tempered response supported the Yen but failed to trigger aggressive buying.
However, there is a limit. Some traders hesitate amid rising Japanese government bond yields and concerns about Japan’s faltering fiscal health. These concerns are preventing investors from driving the Yen significantly higher.
The Federal Reserve, on the other hand, is not purely dovish. Cleveland Fed’s Loretta Mester said policy is well-positioned to pause after 75 basis points of cuts, Bloomberg reported. That also helped buttress the US Dollar against its decline.
Next on the agenda is keeping a close eye on USD/JPY. The support is located at around 157.00, and the resistance is at 157.90. “Whether this repressive trend continues would likely be a function of further risk-aversion headlines today and how serious intervention threats become in the days ahead.
