The Japanese Yen (JPY) sticks to strong gains for the second straight day and trades near its highest level since November 14 against a broadly weaker US Dollar (USD) through the early European session on Monday. Following rate checks from Japan’s Ministry of Finance and the New York Federal Reserve (Fed) on Friday, Japan’s Prime Minister Sanae Takaichi warned against speculative moves on Sunday. This heightens the chance of joint US-Japan intervention to stem any further JPY weakness and provides a strong boost at the start of a new week.
Adding to this, the Bank of Japan’s (BoJ) hawkish outlook, along with persistent geopolitical uncertainties, turns out to be another factor underpinning the JPY’s safe-haven status. The USD, on the other hand, languishes near its lowest level since September 2025 on the back of the so-called ‘Sell America’ trade and bets that the US central bank would lower borrowing costs two more times in 2026. The divergent BoJ-Fed expectations contribute to the USD/JPY pair’s intraday slump to sub-154.00 levels and back the case for a further near-term depreciating move.
Japanese Yen gains strong follow-through traction on rising intervention risks
- Japan’s Prime Minister Sanae Takaichi warned on Sunday that officials stand ready to take necessary steps against speculative and highly abnormal market moves. This comes on top of market chatter that the New York Federal Reserve conducted rate checks on the USD/JPY pair around midday on Friday, following a similar call from Japan’s Ministry of Finance. This suggests that authorities may be preparing to intervene in the currency market.
- Japan’s Chief Cabinet Secretary Seiji Kihara said on Monday that he will take appropriate action on foreign exchange according to the Japan-US joint statement. However, he declined to comment regarding reported rate checks.
- The Bank of Japan, as expected, maintained short-term interest rates at 0.75% by an 8-1 vote at the end of a two-day meeting on Friday. Moreover, the central bank raised its economic and inflation forecasts, and signaled its readiness to continue hiking still-low borrowing costs. This further contributes to the Japanese Yen’s outperformance against its American counterpart and drags the USD/JPY pair to its lowest level since November 14.
- US President Donald Trump’s tariff threats to gain control of Greenland, along with a standoff with European allies, raised doubts about the long-standing NATO alliances and led to the loss of trust in global leadership. This, in turn, revives the so-called ‘Sell America’ trade and weighs heavily on the US Dollar amid expectations for more policy easing by the US central bank, which marks a significant divergence in comparison to the BoJ’s hawkish tilt.
- Traders now look forward to the release of the US Durable Goods Orders data for short-term opportunities later during the North American session on Monday. The focus, however, will remain glued to the highly anticipated FOMC policy meeting, starting on Tuesday. Investors will look for more cues about the Fed’s rate-cut path, which will play a key role in influencing the USD price dynamics and determining the near-term trajectory for the USD/JPY pair.
USD/JPY bears await break below the 100-day SMA before placing fresh bets
From a technical perspective, a sustained break and acceptance below the 154.00 horizontal support, also nearing the 100-day Simple Moving Average (SMA), will be seen as a fresh trigger for the USD/JPY bears. Momentum has deteriorated as the Moving Average Convergence Divergence (MACD) slips below the zero line and extends lower, hinting at building bearish pressure.
The Relative Strength Index (RSI) sits at 32, near oversold, suggesting downside momentum is stretched, and a bounce could develop if buyers defend the 100-day SMA. A daily close below that support would risk a deeper pullback, while stabilization above it would keep the broader bullish structure in place.
(The technical analysis of this story was written with the help of an AI tool.)
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.