USD/JPY is staying close to the 158.00 level after some ups and downs. There is talk of Japanese authorities conducting a “rate check” due to the Yen’s wild swings, especially amidst growing concerns about US-EU relations. The US Dollar has dropped from highs above 159.20. Comments from Bank of Japan Governor Ueda earlier raised the possibility of intervention in currency markets through a rate check.

Speculation of Rate Check

This means that Tokyo might reach out to key banks for Yen quotes, hinting at a potential market intervention. The Yen has been losing value since the Bank of Japan decided to keep interest rates at 0.75%. Governor Ueda mentioned that inflation is close to the 2% goal, suggesting that monetary tightening could be on the horizon. However, he said they will review previous rate hikes before making further changes. The US Dollar is facing challenges. The USD Index is having its worst week since June, driven by tensions between the US and EU. Strong US GDP and ongoing inflation data haven’t helped boost the Dollar. Now, traders are looking forward to the expected moderate rise in US Flash PMIs for January business activity. We are seeing a familiar situation like in early 2025 when fears of intervention affected the market around the 158.00 level. Previous “rate checks” led to a spike in short-term implied volatility, creating a favorable environment for options traders anticipating price swings, regardless of direction.

Reminiscent Market Patterns

Back then, the best strategy was to buy volatility using methods like long straddles or strangles. This allowed traders to profit from the sudden Dollar/Yen fluctuations without needing to guess if an intervention would happen. The uncertainty itself became the opportunity. Now, on January 23, 2026, USD/JPY has risen past 161.50, and the market is even more anxious. Recent data shows Japan’s core inflation at 2.8% for December 2025, far above the Bank of Japan’s target. Meanwhile, the latest US jobs report showed an increase of 195,000 jobs, putting pressure on the Federal Reserve to keep interest rates higher than Japan’s. Since the currency pair is at a level not seen since the late 1980s, the chances of official action are much higher than in previous years. One-month implied volatility in USD/JPY options has increased to over 15%, signaling that the market is preparing for a significant move. Traders might want to buy out-of-the-money put options as protection against a sudden drop due to interventions. We should also remember the large multi-billion dollar interventions in 2022, which only provided short-term relief for the Yen. This history suggests that any official selling of US Dollars could cause immediate downward pressure, but the longer-term trend might still rise. This means selling call option premiums at these high volatility levels can be risky but also potentially profitable for those who believe any intervention will not change the overall trend. Create your live VT Markets account and start trading now.

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