USD/JPY pushed back above 162.00 at the start of the week as a wide US-Japan rate gap, safe-haven demand for the Dollar, and escalating US-Iran tensions pressured the Yen. Intervention risk still caps the pair below the four-decade high reached earlier this month.
The Yen is on the back foot again. USD/JPY reclaimed the 162.00 handle in early Asian dealing on Monday, extending Friday's rebound from the 161.30-161.25 area. Several drivers are working against the Japanese currency at once.
Geopolitics and energy exposure weigh on the Yen
Over the weekend the United States launched additional strikes on Iran after Tehran announced the closure of the Strait of Hormuz, and Iran answered with missile attacks on US military installations in the Gulf. That injected fresh uncertainty into global energy markets.
Japan relies on the route for more than 90% of its Crude Oil imports, which amplifies concerns about the country's economic outlook. This vulnerability adds pressure on the Yen and helps push USD/JPY higher.
The rate gap still favors the Dollar
The wider driver is monetary policy. The Federal Reserve is expected to hold its benchmark in a 3.50% to 3.75% target range in July, while the Bank of Japan has raised its policy rate to 1.0%, its highest level since 1995. Even after that move, the differential remains around 250 to 275 basis points, a spread that continues to encourage carry trades unfavorable to the Yen.
Rising Crude Oil prices are also stoking renewed inflation concerns in the United States. That has reinforced expectations for at least one Fed rate increase in 2026, while safe-haven demand for the Dollar adds another layer of support.
Technical picture and what caps the upside
On the charts, the pair is consolidating near its nine-day exponential moving average around 162.00, according to BitcoinWorld. A sustained hold above that pivot could target resistance near 163.50, while a break below it opens the door to support at 160.80.
Traders remain wary that Japanese policymakers may intervene to support the Yen, which could keep USD/JPY below the four-decade peak set earlier this month. Attention now turns to upcoming US inflation data and Fed Chair Kevin Warsh's testimony before Congress for clearer direction later in the week.
Sources: TradingPedia, BitcoinWorld
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