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The yen’s breach of 160 versus the dollar underscores the currency’s vulnerability to further weakness and the risk that authorities enter the market again to slow its decline.
Investors are on alert for market moves that could prompt another round of official intervention. While it strengthened slightly on Monday, the currency has still unwound more than half the gains it made during a record bout of intervention that began in late July.
US Treasury Secretary Scott Bessent on Monday reiterated that he believes the Japanese government and Bank of Japan “will do things that will lead to a stronger yen.”
“For now, the markets should be on edge for intervention risks,” said Paresh Upadhyaya, a strategist at Pioneer Investments. “The yen remains acutely vulnerable to moves in US interest rates and broad based swings in the dollar.”
Its latest decline was fueled by a broad advance in the dollar on Friday as traders brought forward expectations for a Federal Reserve rate hike as soon as September. That has made it harder for Japanese authorities to strengthen the currency after it failed to break through 155 following the intervention, when the US joined Japan in their first coordinated yen-buying operation since 1998.
“Bessent wants Japanese authorities to hike interest rates and thinks that they will, but with the Federal Reserve likely to hike next meeting as well, it may not be enough to stop the yen’s slide,” said Andrew Hazlett, a foreign-exchange trader at Monex Inc.
While the precise thresholds for intervention remain uncertain, strategists said potential trigger levels start as close as 161, followed by the 162-163 zone.
Markets are also pricing in about a 70% chance the Bank of Japan will raise interest rates next month, with a hike more than fully priced in by Oct. 30.
“For key levels, 161 is the first threshold to watch, followed by the 162.9-163.3 area, where the authorities intervened last time,” said Rinto Maruyama, senior rates and FX strategist at SMBC Nikko Securities. Still, the government’s approach during the previous episode “placed considerable emphasis on maintaining an element of surprise,” meaning authorities could act at any time, he said.
The yen traded at 159.69 per US dollar at 2:10 p.m. in New York on Monday, about 0.3% stronger than its close on Friday at 160.09.
Japan spent a record $96.4 billion over the past month to support the yen after it tumbled to a four-decade low, according to Finance Ministry data. Finance Minister Satsuki Katayama and Bessent have both signaled a willingness to act again if necessary.
Options pricing, however, suggests traders are not overly concerned that intervention is imminent. Risk reversals, which measure the relative demand for bullish and bearish options, also show less demand for yen upside protection, with the premium roughly two-thirds narrower than the extremes seen in early August. Japanese officials have repeatedly indicated that it is the speed and disorderliness of currency moves, rather than any particular exchange-rate level, that is key in assessing the need to intervene.
“Our sense is that intervention risk becomes meaningful once dollar-yen starts trading above 162,” said Rodrigo Catril, a strategist at National Australia Bank Ltd. “It’s hard to do so when the dollar is going up on a broad basis and with the Fed sounding hawkish.”
Speculative positioning is also turning against the yen again. Hedge funds have resumed building short positions after initially slashing bearish bets following the intervention. They have maintained an overall negative stance on the currency since July 2025.
“I don’t think the Japanese authorities necessarily need to wait for the BOJ meeting to intervene again if the yen weakens rapidly,” said Carol Kong, a strategist at Commonwealth Bank of Australia. “But with a September rate hike highly priced, the authorities may prefer to see whether monetary policy can do some of the work in supporting the yen first.”
Ultimately, intervention alone may struggle to reverse the currency’s trajectory while Japan’s real interest rates remain deeply negative, market watchers say.
“The BOJ is in a bigger dilemma given that there is a limit to how much it can out-hike market expectations,” said Moh Siong Sim, a strategist at the Oversea-Chinese Banking Corp. “It looks like other options such as measures to encourage capital repatriation will have to come into play in order to turn the tide of yen weakness around.”
With assistance from Mia Glass, Vassilis Karamanis, Aline Oyamada, Mark Tannenbaum and Umesh Desai.
This article was generated from an automated news agency feed without modifications to text.
