Yen tries to rebound under the eyes of Japanese authorities

The Japanese yen strengthened in Asian trading on Wednesday against a basket of major and minor currencies, posting its first gain in eight sessions against the US dollar as traders engaged in bargain buying from lower levels, while Japanese monetary authorities closely monitored the key ¥160 threshold.

US Treasury Secretary Scott Bessent said he was confident that Bank of Japan Governor Kazuo Ueda would do “whatever is necessary” if granted sufficient independence by the Japanese government, signaling Washington’s preference for further interest rate hikes by the Japanese central bank.

Price overview

• USD/JPY today: The dollar fell against the yen by 0.15% to ¥158.84, from the day’s opening level at ¥159.08, after touching an intraday high of ¥159.11.

• The yen closed Tuesday down 0.2% against the dollar, marking its seventh consecutive daily loss, while touching a three-week low of ¥159.25 amid continued assessment of developments surrounding the Iran war.

Japanese authorities

Japanese authorities are closely monitoring movements in the domestic currency market, especially as the yen weakens toward the critical ¥160 per dollar level, which is widely viewed as the threshold that could trigger another official intervention.

Sources told Reuters that Tokyo intervened several times in late April and early May to halt the yen’s decline, though the currency’s rebound proved short-lived. The yen recently weakened to ¥159.25 per US dollar, its weakest level since April 30.

The US dollar

The US Dollar Index slipped by less than 0.1% on Wednesday, retreating from a six-week high of 99.43 points, reflecting a slowdown in the dollar’s broad gains against major global currencies.

Beyond profit-taking activity, the dollar weakened following the latest comments from President Donald Trump and Vice President JD Vance regarding the progress of peace negotiations between the United States and Iran.

Trump stated that he would “end the war with Iran very quickly,” expressing confidence in resolving the conflict, while Vice President JD Vance said the United States and Iran had made “very significant progress” in their ongoing talks.

Later today, markets await the release of the minutes from the Federal Reserve’s latest monetary policy meeting, which are expected to provide stronger clues regarding the likelihood of further US interest rate hikes to confront rising inflationary pressures.

Scott Bessent and the Bank of Japan

Bessent told Reuters on Tuesday that he was confident Bank of Japan Governor Kazuo Ueda would do “whatever is necessary” if given enough independence from the Japanese government, signaling Washington’s desire for additional rate hikes from the BOJ.

In a post on X following his meeting with Ueda on Tuesday, Bessent said Japan’s economic fundamentals remain strong and that excessive currency volatility is undesirable, adding that strong economic growth justifies a stronger yen and higher Bank of Japan interest rates.

Japanese interest rates

• Data released Tuesday in Tokyo showed Japan’s economy expanded at an annualized rate of 2.3% in the first quarter of this year, beating market expectations for 1.7% growth, after the world’s fourth-largest economy grew 1.3% in the fourth quarter of last year.

• Following the data, markets raised pricing for the probability of a quarter-point Bank of Japan rate hike at the June meeting from 80% to 85%.

• Investors are now awaiting further Japanese data on inflation, unemployment, and wages in order to reassess those expectations.