The Japanese Yen has gained significantly for the second day in a row, approaching its highest level since November 14. This surge follows recent rate checks by Japan’s Ministry of Finance and the New York Federal Reserve, along with warnings from Japan’s Prime Minister regarding speculative trading. The Yen’s status as a safe haven is bolstered by the Bank of Japan’s firm stance and ongoing geopolitical issues. Meanwhile, the US Dollar has fallen to its lowest point since September 2025, driven by expectations of US interest rate cuts and the trend of ‘Sell America.’

Japanese Intervention in the Currency

Japan’s Prime Minister and Chief Cabinet Secretary are ready to take action against speculative trading in the currency market. The Bank of Japan has kept short-term rates steady at 0.75% and has increased its economic and inflation forecasts, which has further strengthened the Yen against the US Dollar. US policies under President Trump have negatively affected the Dollar, damaging long-standing alliances and trust. Attention now turns to US economic data and the FOMC policy meeting for future market direction. On a technical note, the USD/JPY pair could decline further if it breaks important support levels. With the Relative Strength Index close to oversold territory, some signs suggest buyers may step in at critical points. Given the Japanese Yen’s rapid increase, there are clear signals to anticipate further strength against the US Dollar. Warnings from Japanese officials about intervention seem serious; they previously spent a record ¥9.2 trillion (around $60 billion) in late 2022 to support the currency. These recent threats, coupled with the New York Fed’s rate checks last Friday, indicate a coordinated effort that traders should consider carefully. The contrasting approaches of the Bank of Japan and the US Federal Reserve are central to this situation. The BoJ indicates possible rate hikes from its current 0.75% level, while markets expect the Fed to implement at least two rate cuts this year. This shift would continue to narrow the interest rate gap that has favored the Dollar for a long time. As of the last quarter in 2025, US inflation fell to 2.8%, providing more leeway for the Fed to ease policies and weaken the Dollar.

Geopolitical Tensions and the US Dollar

Geopolitical tensions have revived the ‘Sell America’ sentiment, putting downward pressure on the US Dollar. President Trump’s tariff policies and NATO alliance strains have historically led to Dollar weakness as global investors seek safer options. The JPY benefits from this situation by attracting safe-haven investment, pushing the USD/JPY lower. From a technical perspective, if the USD/JPY pair falls below the 154.00 level, this will signal a significant bearish trend. This could be an opportunity to enter or add to short positions, potentially through buying put options to manage risk while capitalizing on potential declines. Although the RSI indicates the market is stretched, the underlying momentum suggests a move towards the 150.00-151.00 range. Looking ahead, the Federal Reserve’s policy meeting this week is crucial. Any signals of a dovish approach or hints about future rate cuts could speed up the Dollar’s decline. We should brace for volatility but view any temporary increases in USD/JPY as chances to sell at more favorable rates. Create your live VT Markets account and start trading now.

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