USD/JPY pulls back from 159.94 as Japanese officials signal potential intervention, though broad US Dollar strength persists on expectations of a December Fed rate hike.
The pair touched 159.94, its highest in over two months, but Japan's top currency diplomat Atsushi Mimura said moves were too fast and referenced the record ¥15.4 trillion spent buying Yen between July 30 and August 3, putting intervention risk back in focus. MUFG/BTMU say the rhetoric should limit further upside beyond 160.00. However, fully priced December Fed hike bets keep broad USD strength, making a reversal difficult.
The Dollar Index reached 103.08, its highest since April 2025, as traders fully price a December Fed rate hike of 25 bps (with a small chance of 50 bps) after hotter-than-expected US consumer inflation data and Fed officials calling for further hikes. A modest pullback on Thursday to around 102.88 only partially offsets this strength.
The USD/JPY pair retreated to 159.70 after hitting a two-month high of 159.94, as Japanese currency diplomat Atsushi Mimura cautioned against rapid volatility. While intervention fears loom, the US Dollar remains supported by markets fully pricing in a December Federal Reserve rate hike following recent inflation data.
Japanese officials warned that recent currency moves were too fast, reviving memories of the record ¥15.4 trillion intervention spent between July 30 and August 3, which makes traders cautious about pushing USD/JPY beyond 160.00.
Firm Fed rate hike expectations after hotter US inflation data, plus upcoming jobless claims and Friday's PPI, could keep the US Dollar strong and the upward USD/JPY trend hard to reverse.
Markets fully price a December Fed rate hike, mostly 25 basis points, after hotter-than-expected US inflation data and Fed officials calling for further hikes toward the 2% inflation target.