Japanese yen rebounds from 18-month low against dollar
The Japanese yen strengthened from an 18-month low against the U.S. dollar on Wednesday after Japanese officials issued fresh warnings of potential market intervention, while the greenback faced modest pressure as traders assessed the Federal Reserve’s policy path amid geopolitical and institutional risks.
The yen had weakened to 159.45 per dollar—its lowest level since July 2024—driven by speculation that Prime Minister Sanae Takaichi may call a snap election, potentially delaying fiscal reforms and fueling bets on looser monetary and spending policies. Finance Minister Satsuki Katayama responded by stating authorities would take “appropriate action against excessive FX moves without excluding any options,” prompting a 0.4% rebound to 158.43.
“Takaichi’s plan to leverage her astonishingly high personal ratings is translating into a rise in bets on reflation… All of that is translating into downward pressure on the yen, which is being offset by intervention threats,” said Karl Schamotta, chief market strategist at Corpay.
Dollar Faces Mixed Drivers
The U.S. dollar index edged lower as traders weighed supportive factors—such as expectations the Fed will hold rates steady and rising Middle East tensions—against concerns over Fed independence due to the criminal investigation into Chair Jerome Powell. Schamotta noted such fears have “faded over the last few days” amid political and central bank pushback.
Geopolitical risks escalated after Iran warned it would strike U.S. bases if Washington intervenes on behalf of protesters, reinforcing haven demand for the dollar. However, headwinds include an impending Supreme Court ruling on the legality of President Donald Trump’s emergency tariffs, which could impact fiscal policy and trade flows.
U.S. economic data showed producer prices rose slightly in November amid higher gasoline costs, while retail sales exceeded expectations, underscoring persistent consumer resilience.
Analysts at LMAX Group noted that while speculative yen positions have been largely unwound, a break above 160 could trigger fresh short bets, though intervention risks add “two-way risk” to the currency pair.
