USD/JPY rises above 161.95 to 162.41, yen at 40-year low

USD/JPY extended gains above the long-standing 161.95 level to reach 162.41 in the Asian session on June 30, based on top-of-book data. The move sent the yen to its weakest level in 40 years and occurred after public admonitions from Finance Minister Shunichi Katayama and Chief Cabinet Secretary Hiroshi Kihara.

The 161.95 level had served as a resistance since the July 2022 foreign-exchange intervention. Traders pointed to a widening interest-rate gap between US and Japanese government debt and to large domestic policy actions in Tokyo as factors in the currency’s decline.

The Bank of Japan raised its policy rate to about 1% in mid-June, the highest since 1995. US policy rates stood at 3.50%–3.75% at the time, with markets pricing potential moves toward 4.00%. The two-year yield spread between US Treasuries and Japanese government bonds widened to roughly 2.7 percentage points, increasing incentives for carry trades that involve selling yen to fund dollar positions.

Domestic fiscal policy contributed to market moves. Prime Minister Sanae Takaichi unveiled a $2.3 trillion public-private investment program spanning 14 years at the end of June. Market participants noted that the size and duration of the package coincide with concerns about higher long-term yields on Japanese government bonds.

Foreign inflows into Japanese equity markets also affected currency flows. The Nikkei 225 reached an intraday record high of 72,832 on June 22 as foreign capital bought technology and semiconductor stocks. Those investors frequently hedged currency exposure, which required selling spot yen and increased immediate selling pressure on the currency.

From a technical perspective, USD/JPY traded above its 20- and 50-day moving averages and inside a short-term ascending channel. Short-term resistance levels were identified near 162.40, 162.73/97 and 163.26. Near-term supports were cited at 161.70, 161.33 and 160.90.

Japanese officials issued verbal warnings aimed at supporting the yen, but no direct market intervention was reported on June 30. Market participants indicated that, without a concrete intervention or a narrowing of the US-Japan yield gap, the pair continued to trade with upward momentum during the session.