Yen Weakens Past 160 as Carry Trades Dominate

The Japanese yen depreciated past 160 per dollar on Monday, reversing gains from earlier in the session as traders piled on short bets against the currency amid persistent carry trades, where investors are borrowing against the low-yielding yen and investing in other currencies. The move reflects the continued interest rate gap between Japan and the US, which has outweighed efforts by the Bank of Japan to gradually tighten policy and repeated currency intervention by Tokyo. Still, the Bank of Japan is widely expected to raise interest rates this week in an effort to contain inflation and stabilize the currency. Meanwhile, the yen found some support after the US and Iran reached a peace agreement to reopen the Strait of Hormuz. Oil prices subsequently fell to a two-month low, easing inflation pressures and reducing import costs for energy-dependent economies such as Japan.

The Japanese yen weakened to around 160.2 per dollar on Friday, surrendering some of the previous session's gains as investors awaited the Bank of Japan's policy meeting next week, where it is widely expected to raise interest rates amid persistent inflation and sustained weakness in the currency. The BOJ is expected to lift its policy rate by 25 basis points to 1%, marking the first increase since December last year and the highest level since 1995. Meanwhile, BOJ Governor Kazuo Ueda has been hospitalized with a hepatic cyst infection and is set to miss the meeting. On Thursday, the yen climbed as much as 0.6% after the dollar retreated sharply following President Donald Trump's remarks that a peace deal with Iran could be signed as soon as this weekend in Europe. Japan's economy remains particularly exposed to geopolitical tensions in the Middle East due to its heavy dependence on oil imports from the region.

The Japanese Yen touched 160.57 against the USD, the lowest since April 2026. Over the past 4 weeks, US Dollar Japanese Yen gained 1.87%, and in the last 12 months, it increased 11.91%.