USD/JPY ended Tuesday at 162.27, with the yen stuck near 40-year lows as Japanese authorities have yet to intervene. Reports that the state pension fund will not shift its asset structure imminently, plus a stronger dollar and higher oil, have kept the pressure on the currency.
The yen is holding near four-decade lows, and traders are waiting to see whether Tokyo will act. USD/JPY ended Tuesday at 162.27, and pressure on the currency has persisted because Japanese authorities have not carried out fresh interventions to support the exchange rate.
Pension fund reports weigh on the yen
The yen fell sharply on Monday after Reuters reported that Japanese authorities do not plan to change the asset structure of the state pension fund in the near future, which reduced expectations of additional support for the domestic financial market. Finance Minister Satsuki Katayama later said the country's largest pension fund could adjust its investment structure if necessary. She also proposed including government bonds in a tax-free investment programme for private investors to draw more interest into domestic assets.
More pressure came from outside Japan. A stronger US dollar and a fresh surge in oil prices added to the yen's weakness, with the catalyst being President Donald Trump's decision to restore the blockade of Iranian ships passing through the Strait of Hormuz. Trump also called for countries that benefit from the security of the route to compensate Washington for its protection costs.
Rate gap and Middle East risk cap the downside
The wide interest rate gap between Japan and other major economies, including the US, continues to undermine the yen amid concerns stemming from the Middle East crisis. Escalating US-Iran tensions and firming Fed hike expectations, tied to renewed inflation fears over the Strait of Hormuz closure, help limit dollar losses.
Spot prices stayed close to the four-decade high touched earlier this month as traders awaited US consumer inflation figures and the Fed's Kevin Warsh's inaugural congressional testimony. The latest close at 162.10-162.00 now forms initial intraday support for the pair.
What the charts show
Momentum readings are muted. The Relative Strength Index is hovering near a neutral 52, while the MACD sits fractionally positive near the zero line, pointing to a cautious upside tone rather than an impulsive rally. A breakout through triangle resistance near 162.55-162.60 would be needed before positioning for further gains.
RoboForex analysts see the pair possibly dipping before resuming an upward path towards 163.30 and possibly 164.15. Intervention risk remains the key wildcard for yen bulls.
Sources: FXStreet, FXStreet (RoboForex)
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