USD/JPY: Yen Hits Seven-Month High Near ¥153 with BOJ Hike Nearly Priced In

The dollar has fallen from above ¥160 toward ¥153 in one week. Just when you dumped your short, right?

💴 Yen breaks through intervention levels

• The USD/JPY dropped toward ¥153 Tuesday, sending the yen to its strongest level since February. The pair traded above ¥160 only last week, meaning the Japanese currency has strengthened by roughly 4% in a matter of days.
• The move carried the dollar-yen below the levels reached after Japan and the US jointly intervened in July.
• Japanese authorities spent a record ¥15.4 trillion ($96.5 billion) supporting the currency between July 30 and August 26. This time, monetary-policy expectations are doing more of the lifting.
• Traders are unwinding short yen positions accumulated while Japan offered significantly lower rates than other developed markets. Those positions often fund the carry trade: borrowing cheaply in yen to purchase higher-yielding assets elsewhere.

📈 BOJ hike moves closer

• Japan revised second-quarter economic growth higher to an annualized 1.4%, supported by stronger business investment.
• Real wages rose 2.4% annually in July, their biggest increase since May 2021 and seventh consecutive gain. Better purchasing power gives the economy more room to absorb higher borrowing costs.
• Swap markets now indicate around a 98% probability that the Bank of Japan raises its policy rate by 25 basis points to 1.25% on September 18. Another increase to 1.5% is fully priced by January.
• Finance Minister Satsuki Katayama said Tokyo and Washington remain aligned on promoting stable currency markets following their rare joint intervention.

🇺🇸 CPI could interrupt the rally

• The dollar side of the pair remains complicated. August payrolls rose by 162,000, nearly triple expectations, lifting the probability of a Federal Reserve hike next week to around 60%.
• Normally, higher US rates would support the dollar-yen by widening the yield advantage available on dollar assets.
• Yet the greenback’s index fell to a two-week low near 98.80 Tuesday. Fiscal concerns and caution before US inflation data are limiting the dollar’s response.

👀 What to watch now

• Producer prices arrive Thursday, followed by CPI Friday. Hot figures could lift Treasury yields and produce a sharp dollar rebound before the BOJ even enters the room.
• On the chart, ¥153 is the immediate pivot, followed by ¥152 and the psychological ¥150 level. Resistance sits near the former intervention floor around ¥155.
• A sustained break below that zone confirms the trend change; a hot US CPI could remind yen bulls that two central banks are currently auditioning for the hawkish role.