Yen Nears Year’s Low as Strategists See Higher Intervention Bar

The yen is hovering near its weakest level of the year against the dollar, while traders see a higher threshold for official intervention this time around.

The Japanese currency breached 159 per dollar on Thursday, close to the 159.45 level that prompted a so-called in January by the US Federal Reserve. Yet the backdrop has shifted. Rising oil prices tied to the Iran conflict and resilient US data have pushed the dollar higher on fundamental grounds, potentially making it harder for Japanese authorities to justify stepping in.

“The bar for intervention is higher now,” said Rodrigo Catril , a currency strategist at National Australia Bank Ltd. “Our sense is that intervention is unlikely unless we see a disorderly move higher in dollar-yen. The 158/159 area was the old line in the sand, and we suspect a level closer to 162 is where the new line lies.”

Japan’s heavy reliance on Middle Eastern energy imports means higher crude prices worsen the trade balance and stoke inflation, naturally weighing on the yen. At the same time, the dollar has benefited from safe-haven flows, reinforcing the move.

That contrasts with January, when the yen’s slide appeared more driven by positioning and speculative momentum. Japanese officials have repeatedly emphasized that they are focused on excessive volatility rather than defending specific levels.

“Compared with January, US authorities may have less incentive to conduct a rate check,” JPMorgan Chase & Co. strategists including Junya Tanase wrote in a note dated Wednesday. “Given that the latest leg higher in USD/JPY has been driven by broad USD strength, it may be difficult to justify intervention even if the pair trades into the 160s,” they said, maintaining their medium-to long-term dollar-yen forecast at 164.

The currency briefly found support after Prime Minister Sanae Takaichi ’s resounding lower house election victory last month. But it has since weakened following media reports that she is cautious about further interest-rate hikes and after she two dovish members to the Bank of Japan’s policy board.

Finance Minister Satsuki Katayama reiterated earlier this month that the government could act to quell excessive currency moves, including through market intervention.