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USD/JPY holds near 162.5 as rate-gap carry keeps yen gains capped
The yen has swung within roughly a one-yen range over two weeks, with Japan already intervening 11.7 trillion yen between late April and late May.
USD/JPY traded largely flat around 162.5, adding about 0.1% for the week and staying just below a near-term cycle high printed under 163.00, according to FXStreet.
The dollar-yen move has effectively compressed into a very tight range over the past two weeks, reflecting what FXStreet describes as the “carry math” staying dominant: the Bank of Japan raised its policy rate to 1.0% in June, while the Federal Reserve keeps its target range at 3.5% to 3.75%, with projections pointing to at least one more hike this year.
FXStreet said the widening interest-rate gap keeps investors paid to remain short the yen despite market “scare” moments, and it also cited constraints on how much the BoJ can close the gap. It noted that debt-servicing costs take up about a quarter of Japan’s national budget in the current fiscal year and that fiscal expansion is working against tightening.
On the intervention front, FXStreet pointed to the Ministry of Finance executing record yen intervention of 11.7 trillion yen between late April and late May, which pulled USD/JPY back to the mid-150s within about six weeks. The report added that Japan has continued near-daily assurances that it is ready to act, but investors appear to respect the threat without expecting large follow-through.
Latest closeUSD/JPY 162.33 ▲0.2%