The Japanese Yen stays weak against the dollar as low BoJ rates contrast with higher global borrowing costs, sustaining carry trade demand.
The USD/JPY pair remains near a 40-year high, trading close to 164.00, as investors weigh potential government intervention to support the yen. Despite a slight pullback on Friday, the currency pair is underpinned by a widening monetary policy gap between the Bank of Japan and the U.S. Federal Reserve.
Japan’s borrowing costs remain at 1%, the highest since 1995, yet still significantly below U.S. and other major economy rates. This divergence fuels the carry trade, where investors borrow in low-yielding yen to invest in higher-yielding assets, pressuring the currency. Geopolitical risks, including Middle East energy supply disruptions, further weigh on the yen’s performance.
Crude oil prices surged to a fresh high since June 11 amid escalating tensions, including Houthi attacks on Saudi oil tankers and the closure of key shipping routes. These developments exacerbate supply concerns, adding to the yen’s relative weakness.