The continued rise in the yen exchange rate has raised concerns about intervention, and PH has analyzed the future trend

On Tuesday (June 30) in the European session, the dollar rose against the yen for the second consecutive trading day. The exchange rate held steady at around 162.30 after the European market opened, which was close to the 40-year high set in the day.

The significant interest rate difference between the two major economies of the United States and Japan continues to weigh on the performance of the yen: the Bank of Japan raised its policy rate to 1% in June, the highest interest rate since 1995; the Federal Reserve maintained its base rate in the range of 3.5% to 3.75%, and the spread of nearly 250 basis points kept the yen carry trade active, pushing up the exchange rate of the dollar against the yen.

At the same time, new dollar buying in the market has stopped the correction of the dollar since its high in May 2025. Regional geopolitical tensions have exacerbated market concerns about inflation, further raising expectations of the Federal Reserve raising interest rates. According to data from CME Group's FedWatch tool, traders generally bet that the Federal Reserve will raise interest rates this year, which supported the dollar and drove the dollar higher against the yen.

The fundamentals of multiple bullish dollar factors have greatly weakened the market's expectations that the Japanese authorities will enter the market again to support the yen. At today's press conference, Chief Cabinet Secretary Kihara reiterated that the government will take necessary measures to control the foreign exchange market at any time. Finance Minister Satoshi Katayama also added that he will take timely measures according to the trend of the exchange rate. Even if the Bank of Japan releases its hawkish stance, it has failed to boost the confidence of the yen bulls, and there is still room for the dollar to rise against the yen. Japan's June interest rate meeting notes show that the participating officials focused on the continued upward inflation risk, some members called for accelerating the pace of interest rate hikes and adjusting interest rates to the neutral range of the economy; the current situation of rising inflation in Japan, although providing a basis for the central bank's tightening policy, it is difficult to reverse the weakness of the yen. The PH research team believes that the Bank of Japan's statement has limited impact on the short-term trend, and the interest rate spread is the dominant factor.

The current focus of the market has shifted from "whether Japan will intervene in the foreign exchange market" to "when Japan will intervene again", and past events have proved that a number of pre-operations cannot narrow the interest rate gap between the United States and Japan, and the yen can only find temporary support. Japan intervened twice in late February and early May to boost the yen only in the short term. After the market repriced the expectation of the Federal Reserve raising interest rates, the dollar resumed its upward trend against the yen. As long as US bond yields continue to exceed JGB yields, the carry trade driven by interest rates will continue to pressure the yen.

This month, the Federal Reserve's interest rate meeting released a hawkish signal, superimposed on the US core PCE inflation rose to 3.4%, a three-year high, the current market pricing shows that the probability of raising interest rates in September 25 basis points is about 60%, and there may be up to three interest rate hikes expected this year.

ING analyst Chris Turner said the dollar continued to rise against the yen, raising concerns that the Japanese authorities would intervene againforeign exchange marketIn late April and early May, when the dollar began to break through the 160 level against the yen, the Bank of Japan sold about $70 billion of dollar assets. 162 is usually seen as another key threshold (i.e. the highest exchange rate level in 2024), but Tokyo may choose to wait until the US holiday on Friday to reduce the active level of market trading before intervening.

At the same time, markets have had time to react to Mr. Warsh's comments on Wednesday and the US jobs data on Thursday. If it were to repeat the mistakes of 2024, Tokyo could also hold out until the next Japanese public holiday. In that case, the time to act is likely to be between July 16 and 17, because it is the Japanese Ocean Day holiday. However, the Japanese authorities should understand that any intervention will only slow rather than reverse the current trend of the dollar's rise against the yen. A reversal would require not only a sharp increase in interest rates by the Bank of Japan, but also a change in the overall direction of the dollar - which would have to wait until later this year, when the Federal Reserve's hardline stance is no longer sustainable.

This week, a number of key data and speeches will guide the follow-up trend of US debt and the US dollar, which in turn will affect the dollar against the yen: Federal Reserve Chairperson Kevin Walsh will give a speech at the European Central Bank's Sintra Forum on Wednesday, and the US non-farm payrolls data will be released on Thursday, which will release the core signal of the US interest rate outlook; before that, the US consumer confidence index and JOLTS job vacancy survey released on Tuesday will also attract market attention.

technical analysis

(Dollar/yen daily chart, source: Internet)

The dollar broke through the rising wedge against the yen daily, hitting a 40-year high of 162.40. The previously anticipated reversal pattern was completely invalid. The Pakatan technical analysis team pointed out that the multi-cycle RSI indicator entered the overbought range simultaneously, indicating that the currency pair may enter the consolidation momentum first in the short term, and then try to rise later.

The bulls' short-term upside target is 165, with the key mid- to long-term resistance at 170.

The first short-term support level is 160.20, followed by the integer level of 160.00; if it effectively falls below this level, the next support is the 50-day moving average of 159.50, and then 157.90 below is a strong support range formed by the coincidence of the rising trend line and the horizontal support.