The foreign exchange market witnessed a sharp move as the USD/JPY climbed past 159, marking its highest level since July 2024. This pivotal breakthrough has drawn global attention, reflecting growing momentum in the U.S. dollar amid shifting monetary landscapes.
Drivers Behind the Dollar's Strength
The rally is primarily fueled by the Federal Reserve's sustained hawkish stance. Solid economic indicators and resilient inflation data have strengthened expectations that interest rates will remain elevated for longer. In contrast, the Bank of Japan continues its ultra-loose policy, widening the yield spread and boosting dollar demand.
- U.S. core PCE inflation exceeds forecasts
- Japan’s Q1 GDP growth slows to 0.4%
- Markets price in delayed Fed rate cuts
Market Response and Outlook
While signs of intervention emerged in Tokyo, strong dollar buying pressure has kept the yen under strain. Analysts warn that a firmer Fed tone in upcoming meetings could push USD/JPY toward the 160 threshold. Traders are advised to prepare for increased volatility amid policy divergence.