Dollar-yen struggled in the ¥159 range, with some market participants pointing out that the ¥160s carry less significance as an intervention line than they once did. Rising expectations for a US rate hike and caution over intervention are creating crosscurrents.
In today's foreign exchange market, dollar-yen remained in the ¥159 range and briefly fell to around ¥159.50. At the same time, the dollar briefly rose to ¥160.20 as expectations for a US rate hike increased following last week's speech at Jackson Hole.
However, selling on intervention concerns and profit-taking in the ¥160s capped the pair's gains, and some market participants pointed out that the level no longer carries as much significance as an intervention line as it once did. The view is that the pair has not yet reached a level at which Japanese authorities would immediately intervene again.
The market's focus has shifted away from a simple specific level and toward US interest-rate trends, particularly movements in real interest rates and the pace of the yen's depreciation. Some market participants have also pointed out that demand for carry trades exploiting interest-rate differentials will persist as long as US real interest rates remain elevated.
Technically, after being pushed back to the mid-¥159 range, the immediate focus is on whether the pair can recover the psychologically important ¥160 level. A break above ¥160.50 would bring the next resistance level in the ¥162 range into view, while around ¥159 is seen as support on the downside. If that level is broken, the strength of selling into rebounds is likely to come back into focus.