USD/JPY moved in a wide range on Monday, rising to about 159.86 before easing to around 159.35, close to flat. Since early April it has traded in a band of roughly 200 pips, between about 158.00 and 160.00.
Focus is on the Bank of Japan ahead of the 27–28 April meeting, as market talk of a rate rise increases. Japan imports nearly all of its crude oil, and the effective closure of the Strait of Hormuz since late February has pushed energy costs higher.
Dollar Softens As Markets Watch Iran
The US Dollar softened as risk appetite improved, with attention on the Iran conflict and hopes of a resolution. On Tuesday, March PPI is forecast at 1.2% month-on-month versus 0.7% in February, and 4.6% year-on-year versus 3.4%, alongside speeches from Goolsbee, Barr, Barkin, Collins, and Paulson.
On the five-minute chart, price is below the day’s open at 159.73, with the Stochastic RSI falling from near 90 to the high-30s. On the four-hour chart, price remains above the 200-period EMA at 158.51, while Stochastic RSI is 74.46.
The yen is influenced by Japan’s economy, Bank of Japan policy, yield gaps with the US, and risk sentiment. Ultra-loose policy between 2013 and 2024 weakened the yen, and the 2024 shift away from it has narrowed the gap with US yields.
Looking back to April 2025, we saw USD/JPY struggling to break the significant 160.00 level. Speculation was high that the Bank of Japan would raise rates that month due to rising energy costs linked to Middle East tensions. This created a ceiling for the pair as the market anticipated a stronger yen.
Intervention Risk Rises Near Old Highs
That 160.00 level was eventually breached later in 2025, which prompted direct intervention from Japanese authorities to buy yen and push the dollar down. However, the move was temporary because the fundamental driver, the interest rate difference between the U.S. and Japan, remained overwhelmingly wide. The Bank of Japan’s actions have since been seen as only slowing the yen’s depreciation, not reversing it.
Fast forward to today, April 14, 2026, and the pair is trading near 165, showing the underlying upward pressure has continued. The U.S. Federal Reserve has only recently begun a slow cutting cycle, with its policy rate at 4.75%, while the Bank of Japan has moved incredibly slowly, bringing its rate to just 0.25%. This gap continues to make holding U.S. dollars far more profitable than holding Japanese yen.
This history suggests that while the fundamental uptrend remains strong, the risk of sudden, sharp pullbacks from intervention is very high as we approach old highs. Derivative traders should therefore focus on volatility, perhaps by buying yen call options or USD put options to profit from a potential surprise intervention. These options provide a way to bet on a sudden yen strengthening with limited risk.
At the same time, the powerful carry trade—borrowing cheap yen to buy high-yielding dollars—is still the dominant strategy. The yield on the 10-year U.S. Treasury note is currently around 4.1%, while the Japanese equivalent sits at only 0.9%, making the dollar attractive. Traders can use currency futures to execute this long-USD/short-JPY position while collecting the positive swap, or interest rate differential.
In the immediate weeks ahead, we will be watching the upcoming U.S. inflation report for any signs of slowing that might accelerate Fed rate cuts. The Bank of Japan also meets on April 28, and while no major policy shift is expected, traders will scrutinize the language for any stronger commitment to normalizing policy. The market remains skeptical that the BoJ will act aggressively enough to close the rate gap meaningfully this year.
