USD/JPY plunged into the 156-yen range amid warnings from Japanese and US authorities, but expectations of US rate hikes provided support, and the view is spreading that the pair will remain firm.
In the foreign exchange market, USD/JPY fell sharply in response to warnings from Japanese and US authorities about yen depreciation, with selling temporarily taking it down to 156.93 yen. Dip-buying then emerged, and the pair recovered to the mid-157-yen range during Tokyo trading on the 27th, prompting awareness of its underlying firmness.
The trigger for the decline was comments by Finance Minister Katayama concerning the Japan-US summit held on the 24th. He disclosed that President Trump had expressed concern about yen depreciation at the meeting. At a subsequent meeting between the Japanese and US finance ministers, the view that the yen was undervalued was reaffirmed, heightening concerns about actual currency intervention.
In trading on the 25th, reports that Iran had proposed to the US that the Strait of Hormuz be reopened sent oil prices lower. WTI fell around 2%, easing concerns about inflationary pressure and higher long-term yields and prompting dollar selling.
EUR/USD fell to around $1.1386 before buying back gained the upper hand against a backdrop of lower long-term yields, taking it back to $1.1411. In the Tokyo market on the 28th, a range of 156.800–158.400 yen was expected, with warnings between Japan and the US and differences in monetary policy cited as factors driving price movements.