The 160 mark approaches again: yen intervention risks reignite, with the U.S. stance becoming a key variable.

Title context: The 160 mark approaches again: yen intervention risks reignite, with the U.S. stance becoming a key variable. Text: As the Japanese holiday ends, yen intervention risk has once again become a market focus. The yen has been declining for two consecutive weeks and is once again approaching the closely watched level of 160 yen per dollar. On Thursday, the yen rose slightly by 0.3% against the dollar to about 157.85, but failed to offset the declines of the past four days. Strategists believe that, given the yen's continued depreciation after the Bank of Japan's September 18 policy meeting, 160 has once again become the level that tests Japan's tolerance for yen weakness. Although the Bank of Japan has accelerated its tightening cycle, there is dissent within its policy board, while the Federal Reserve appears to be on a more hawkish path. Carol Kong, a currency strategist at Commonwealth Bank of Australia, said: "If U.S. Treasury yields continue to rise and the market continues to test Japan's determination to defend the yen, the dollar/yen exchange rate could soon break through 160." She added that a rapid break above this threshold would significantly increase the likelihood of official action, especially given recent reports of rate checks and precedents for coordinated intervention. The dollar is supported by rising U.S. Treasury yields, strong U.S. economic data, and persistent inflation concerns, which have prompted traders to expect more aggressive tightening by the Federal Reserve. Last Friday, the Bank of Japan raised interest rates by 25 basis points, but Governor Kazuo Ueda's subsequent remarks failed to meet the market's increasingly hawkish expectations. Matthew Ryan, head of market strategy at Ebury Partners Ltd., said that if the market does not believe the Bank of Japan will further tighten monetary policy, the yen may still weaken further in the short term. "Foreign exchange intervention remains a blunt tool for supporting the currency, and without a strong monetary policy response, Japanese authorities will find it difficult to curb yen selling." The 160 mark: Can the deterrent of intervention prevent a breakthrough? However, some strategists believe that the growing threat of intervention itself may restrain the yen's decline. Ray Attrill, head of foreign exchange strategy at National Australia Bank, said: "It is entirely possible for the yen exchange rate to return to 160, but I expect the threat of intervention to prevent a breakthrough of this level." Whether intervention can bring about a lasting reversal may depend to a large extent on whether the United States participates. Historically, when monetary policy fundamentals remain unfavorable, Japan's unilateral operations have often struggled to produce a sustained impact. Attrill said the market may relatively quickly ignore another unilateral action. The United States joined Japan in buying yen this summer, increasing the risk for investors betting against the yen. U.S. Treasury Secretary Scott Bessent has repeatedly signaled support for a stronger yen, even saying bluntly that he is "the house" on the yen exchange rate and warning traders shorting the yen "not to bet against him." Attrill said that if the dollar/yen returns to 160, Bessent's credibility will be tested. He added that whether the United States will further support Japan may depend on whether Japan is willing to raise interest rates faster or by more than the market currently expects. Short positions: Speculative positions may be rebuilt after being cleared Changes in speculative positioning may increase downward pressure on the yen. Strategists at UBS Group including Shahab Jalinoos said the latest data show that speculative yen short positions have been "completely cleared," creating room for investors to rebuild short positions "because the carry trade environment continues to improve and the U.S.-Japan interest rate differential remains large." According to the latest data from the U.S. Commodity Futures Trading Commission (CFTC), in the week ended September 15, hedge funds turned bullish on the yen for the first time since July 2025. The data show that these funds held about 251 billion yen ($1.6 billion) in positions related to bets on a stronger yen.