The US dollar/yen pair during the week of 27 July is expected to focus on a move from the low ¥160s toward ¥165, driven by the release of monetary policy decisions in Japan and the US. The possibility of renewed intervention will also be closely watched, although no conclusion has been reached for this week.
Last week, the week of 20 July, the US dollar/yen pair rose above ¥162.8 following the 21 July decision on the Takaichi administration and briefly approached ¥164. After moving within a narrow ¥161–¥162.8 range, the pair gained momentum following the upside breakout.
The range breakout was attributed in part to renewed concerns over fiscal discipline following the decision on the Basic Policy, along with factors supporting US dollar buying and yen selling. Japan's 10-year bond yield rose temporarily to 2.9% before returning to a declining trend.
As reports highlighted a renewed flight to the US dollar in times of crisis, CFTC data showed that speculators' net long US dollar position stood at 460,000 contracts as of 21 July, approaching a record high. The record net short yen positions were 180,000 contracts in 2007 and 2024, and the current position has expanded to a level close to that figure.
This week, the focus is expected to be on a test of ¥165 amid dollar strength and yen weakness, with monetary policy announcements in Japan and the US among the key cues. Market positioning, with long US dollar and short yen positions, has raised concerns that the trade has become "excessive," and whether to resume intervention will also be closely watched. Developments toward fiscal tax cuts are also expected to affect the decision on whether to resume intervention.
The forecast range for the US dollar/yen pair this week is ¥160–¥165, and the possibility of a test of ¥165 is under consideration.