USD/JPY: Dollar Makes Way Toward ¥159 in Fresh Headaches for Japan Officials

Relentless dollar strength is increasingly challenging to Japan officials who are going out of ideas over how to defend the yen.

• The USDJPY pair advanced for a sixth straight session Thursday after renewed dollar strength pushed the exchange rate to levels near ¥159.00. The fresh gains lifted the pair’s valuation closer to its 34-year high of ¥160.20 hit in late April. Back then, Japanese officials couldn’t hold back any longer and decided to wade in, sinking as much as $60 billion in an effort to defend the yen from the dollar’s reign.
• This same scenario might be playing out now. Japan’s currency is again getting demolished while its backers aren’t too convinced now is the right time to intervene. The longer the wait, the more complex things can get. If any intervention happens, it likely won’t be communicated in advance. And if it does happen, but it’s not aggressive enough to fend off the dollar bulls, then the situation may get even worse.
• The Bank of Japan had a chance to bump up the yen’s valuation last week if it had decided to raise interest rates, which it didn’t. The central bank kept rates at 0% to 0.1% and stayed tight-lipped on any forward-looking guidance as to whether it was thinking about raising borrowing costs any time soon. The no-show on that front hurt the prospects of a stronger yen as investors had nothing to hold on to.