Japanese Yen tumbles to 40-year low as US Dollar safe-haven rush deepens

USD/JPY breaks above 163.00, raising the risk of intervention.
Red Sea tanker diversions revive energy-supply concerns.
Japan trade data, inflation, and the Fed decision drive the next move.

Christian Borjon Valencia FXStreet

The USD/JPY extends its rally on Tuesday, hitting 40-year highs above 163.00 as the Greenback continues to gain ground versus the Japanese Yen. At the time of writing, the USD/JPY trades at 163.19, slightly shy of the multi-decade high of 163.24.

USD/JPY weakens as Gulf tensions lift US Dollar demand

The Gulf War continues as the US and Iran exchange strikes. Meanwhile, US President Donald Trump said that Iran wants to desperately meet, but he said that he doesn’t have any interest. He added that the US have not finished at all with Iran, and that they are not leaving now. At the same time, two oil tankers transporting Saudi Crude to Asia changed course in the Red Sea following threats from Yemen's Ansar Allah, which is aligned with Iran.

In the meantime, there’s growing speculation that Washington and Tehran may reach a deal. However, traders remain skeptical about a solution and bought the Greenback against most G8 FX currencies due to its safe-haven appeal.

The US Dollar Index (DXY), which measures the Greenback against a basket of currencies, gains 0.19% to 101.18, refreshing five-day highs.

Meanwhile, Japanese authorities remain mute about the Yen's weakness, though traders should be cautious that USD/JPY is above 160.00, a level seen as a line in the sand that could trigger an intervention.

Ahead, the Japanese economic docket will feature the release of the Merchandise Trade Balance Total for June, ahead of Thursday’s inflation report. In the US, traders are eyeing the release of Initial Jobless Claims data on July 23, while awaiting the Fed’s monetary policy decision next week.

USD/JPY price forecast: Technical outlook

Chart Analysis USD/JPY — USD/JPY daily chart

In the daily chart, USD/JPY trades at 163.22, extending its advance above the clustered Simple Moving Averages (SMA) pack, with the latest composite reading near 160.75 now acting as underlying support. The pair also holds comfortably over the recent horizontal floor near 160.00 and the former trendline break zones at 158.52 and 154.61, reinforcing a bullish near-term bias, while the Relative Strength Index (RSI) at 66.66 stays in positive territory but shy of extreme overbought conditions.

On the downside, initial support is seen at the 160.75 composite SMA area, followed by the psychological 160.00 handle and the earlier uptrend break region near 158.52, with deeper structural backing coming from the longer-standing rising trendline originating around 152.10. With no significant resistance levels immediately overhead in this dataset, the spot remains technically supported, and any pullback toward the 160.75–160.00 band would likely be treated as a corrective dip within the prevailing uptrend as long as price holds above the 158.52 region.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Japanese Yen FAQs

What key factors drive the Japanese Yen?

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

How do the decisions of the Bank of Japan impact the Japanese Yen?

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

How does the differential between Japanese and US bond yields impact the Japanese Yen?

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

How does broader risk sentiment impact the Japanese Yen?

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.

Author

Christian Borjon Valencia

FXStreet

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

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