As the yen’s period of strengthening eases, AUD/JPY is once again attracting attention as a home for yen carry trades. After intervention, USD/JPY broke below the 155 level, and a move into the 152 range also came into view.
Since September, the yen has strengthened at times against a backdrop of coordinated action by Japan and the United States. Yen-buying interventions at the end of April and July pushed USD/JPY below the 155 level and into the 152 range. Depending on developments ahead, a test of levels near the year-to-date low also came into view.
With oil prices continuing to rise and expectations of global rate hikes strengthening, a resumption of carry trades using the low-yielding yen is anticipated. At the same time, U.S. authorities are taking a firmer stance against dollar strength, raising the possibility that the currencies targeted in carry trades will diversify beyond the dollar.