- USD/JPY traded at 159.89 early Friday after briefly breaking 160 for the first time since September. Reuters
- The US two-year Treasury yield rose 34 basis points in two sessions as traders weighed a larger Federal Reserve rate hike in December. Reuters
- Japan spent ¥15.4 trillion buying yen this summer. A new report shows the US contribution was about $497 million, far smaller than traders had been led to expect.
- 1¥160.00 ResistanceA sustained move above 160 puts July's high on the radar
- 2¥163.99 July high · TargetLate July peak that triggered previous joint currency intervention
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The US dollar traded at 159.89 yen early on Friday, November 13, after a brief move through 160 drew a fresh warning from Japanese Finance Minister Satsuki Katayama. The warning came a day after a New York Fed report revealed how little Washington spent on this summer’s joint intervention. Tokyo has shown it can spend heavily to defend the yen. The question now is how long another round of buying could hold while US yields are climbing.
Why Is USD/JPY Rising Toward 160?
The US two-year Treasury yield reached 4.86% after its sharpest two-day rise in three and a half years, Reuters reported. US core consumer prices rose 0.3% in October, the reading Fed Governor Christopher Waller had identified as grounds to consider a half-point hike. Concerns about Middle East oil supplies added to inflation worries after President Donald Trump said the US did not need a deal with Iran.
CME FedWatch put the odds of a 50-basis-point Fed hike in December at 14.5% in Reuters’ early Friday snapshot, up from zero a week earlier. A half-point move was still far from the most likely outcome. What mattered for USD/JPY was that traders had to start pricing it in. The Bank of Japan held its policy rate at 1.25% in October, while the Fed’s target range stands at 3.75% to 4.00%. Rising US yields make it harder for the yen to gain ground even when traders expect the BOJ to raise rates again.
Will Japan Intervene if USD/JPY Breaks 160?
Katayama said on Friday that Japan would respond to currency volatility, but 160 is not an official trigger. The speed of a move matters. A gradual drift above 160 and a rapid jump through it pose different problems for Tokyo, particularly when a weaker yen raises the cost of imported fuel. Japan’s finance ministry makes the intervention decision, and the BOJ executes the trades on its behalf.
The summer operation shows what Japan can do. The finance ministry sold dollars and bought yen on July 30, July 31 and August 3 after USD/JPY reached 163.99 in late July. The US Treasury participated by selling euros to buy yen. Reuters reported that the US purchase was about $497 million, well short of the $10 billion US Treasury Secretary Scott Bessent had suggested was possible. That disclosure gives traders less reason to count on large US purchases if Tokyo intervenes again.
USD/JPY Outlook: What Happens if the Dollar Holds Above 160?
A sustained move above 160 would put July’s 163.99 high back on the radar. Friday’s US producer price report, scheduled for 13:30 GMT, is the next test. If the data push US yields higher, the dollar could stay firm despite Tokyo’s warning. If yields fall and USD/JPY slips back below 160, the case for a fresh run at July’s high weakens.
The distinction is what happens after the first move. Yen buying by Tokyo could send USD/JPY sharply lower in a matter of minutes. For that decline to hold, the yen would have a better chance if US yields eased or traders came to expect faster tightening from the BOJ. The Fed meets on December 8 and 9, more than a week before the BOJ’s December 17 and 18 meeting. Washington gets the first chance to change the rate outlook.
US Treasury yields rose after stronger-than-expected inflation increased the odds of a larger Fed rate hike in December. Japan’s policy rate remains at 1.25%, so higher US yields make dollar assets more attractive relative to yen assets.
Japan has announced no automatic intervention level. USD/JPY already traded briefly above 160, and Finance Minister Satsuki Katayama warned that officials would respond to volatile moves. A rapid rise would put Tokyo under more pressure to act than a brief move through 160.
Japan disclosed ¥15.4 trillion in yen purchases across three trading days in July and August. The US Treasury’s separate contribution was about $497 million.
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