Trusted by over 15 Million Traders
The Most Awarded Broker
for a Reason
CATEGORIES
News
- The probability of the Federal Reserve cutting interest rates soared, and the U.
- The U.S. says it will sign a $490 billion investment agreement with Japan and pa
- USD/JPY maintains bullish momentum as expectations for yen intervention heat up
- Short-term operation guide for major currencies
- November 4th practical foreign exchange strategy
market news
Oil price surges to US$110, USD/JPY 161 is in disaster?
Wonderful introduction:
Optimism is the line of egrets that go straight up to the sky, optimism is the thousands of white sails on the side of the sunken boat, optimism is the luxuriant grass blowing in the wind at the head of Parrot Island, optimism is the little bits of falling red that turn into spring mud to protect the flowers.
Hello everyone, today XM Forex will bring you "[XM Foreign Exchange Platform]: Oil price soared to US$110, USD/JPY 161 disaster?". Hope this helps you! The original content is as follows:
On Tuesday, April 7, the exchange rate of the US dollar against the Japanese yen remained fluctuating around 159.60, fluctuating slightly www.xmniubi.compared with the previous trading day. Previously, the exchange rate briefly rose above 160 at the end of March, and market sentiment became tense. The evolution of the situation in the Middle East continues to push crude oil prices above US$110 per barrel. Japan, as a major energy importer, faces significant exchange rate pressure.
The latest data shows that the large-scale manufacturing sentiment index in the Bank of Japan's March Tankan survey reached 17, exceeding expectations and hitting a high in recent years. This provides certain fundamental support for the yen. However, due to oil price factors, upward risks to the exchange rate remain prominent. Analysts warned that without a substantial correction in crude oil prices, the U.S. dollar against the yen may continue to face upward pressure, and the risk of actual intervention in the 161 to 163 range deserves vigilance.
Current Exchange Rate Dynamics and Potential Intervention Threshold
The recent performance of the USD/JPY exchange rate has shown obvious fluctuation characteristics. Since briefly touching above 160 last Friday, the Japanese authorities have stepped up verbal intervention, and the market's optimism for further dollar strength has somewhat subsided. However, geopolitical risks continue to exist, and high oil prices make it difficult to www.xmniubi.completely close short yen positions. The analysis pointed out that although the expectation of actual intervention may limit the further upward movement of the exchange rate, unless the situation in the Middle East clearly improves and crude oil prices see a significant correction, the upward pressure on the US dollar against the yen is expected to continue. This judgment is based on the reality that the current market trend is difficult to reverse, and also takes into account the solidity of the Bank of Japan's fundamentals.
Similar high ranges have been tested many times in history, and the authorities’ intervention strategies usually gradually shift from verbal warnings to substantive operations to minimize reserve consumption and maintain market order.sequence. In the range of 161 to 163, once the exchange rate begins to become unstable, further upward pressure will quickly amplify. At this time, the deterrent effect of buying the yen is the most significant, which can effectively interrupt the continuation of the speculative trend and reduce the transmission of exchange rate fluctuations to the real economy. Traders should note that this threshold setting is not fixed, but is dynamically adjusted based on multiple factors such as oil price transmission, inflation path, and corporate confidence. Although the exchange rate is currently hovering around 159.60, any changes in geopolitical news may trigger rapid position shifting and amplify the intraday amplitude. Overall, this range has become the focus of the market, and the expectation of intervention itself has constituted a short-term upper limit. However, if oil prices remain high, the risk of a breakthrough still exists.
The profound impact of crude oil prices on exchange rates
The international crude oil market is currently experiencing high levels of volatility. The latest quotation of Brent crude oil is US$108.69/barrel and WTI crude oil is US$111.43/barrel, an increase of approximately 9% and 10% respectively from the previous month. This price level is mainly affected by the situation in the Middle East. As an energy-dependent economy, Japan's import costs have increased significantly, leading to a deterioration in terms of trade and amplifying imported inflation pressure. Analysis shows that every $10/barrel increase in crude oil prices may have a negative drag on Japan's economic growth of about 0.4% to 0.6%, while pushing up corporate production costs and the consumer price index. While some www.xmniubi.companies are relieving pressure through price pass-through, overall the yen's appeal as a safe-haven currency has declined, further reinforcing the relative strength of the dollar against the yen.
If crude oil prices cannot fall back from their current highs, the structural downside risk to the exchange rate will be difficult to alleviate. The oil price transmission mechanism mainly works through two paths: trade balance and inflation expectations. First, it directly worsens the current account. Second, it indirectly affects wage negotiations and consumer confidence through rising corporate costs. Finally, it is reflected in exchange rate pricing as pressure on the yen. The current oil price level is close to the high range in recent years, and any supply-side disturbance may further push the value higher, thereby extending the upward window period for the dollar against the yen.
BoJ Fundamentals and Policy Path
The March Tankan Survey results released by the Bank of Japan on April 1 showed that the large-scale manufacturing sentiment index rose to 17, which was an improvement from the revised 16 in the previous quarter and was the highest level since December 2021; the large-scale non-manufacturing sentiment index was stable near the high of 36. Although the outlook index has been slightly lowered, overall business confidence remains solid. If the Bank of Japan branch governors' meeting to be held this week releases positive signals, it will further increase the possibility of raising interest rates in April.
Current market expectations show that the probability of raising interest rates at the policy meeting on April 28 is close to 70%. These factors provide short-term support for the Japanese yen exchange rate and help alleviate some of the downward pressure. However, in the context of continued high oil prices, policy decisions need to balance the path of inflation and economic growth. The pace of tightening may be cautious and cannot www.xmniubi.completely offset the exchange rate impact caused by geopolitical factors. The robustness of the Tankan data reflects the business sector’s optimistic judgment on domestic demand, which to a certain extentIt has hedged against external shocks, but the lagging effect of oil price transmission may still delay the emergence of policy effects.
Analysts believe that the expectation of interest rate hikes itself can boost the attractiveness of the Japanese yen and curb short positions by increasing holding costs. However, its intensity is limited by oil price variables. If crude oil remains above US$110 per barrel, the support effect of policy normalization on the exchange rate will be partially diluted. As an important window for policy signals, branch meetings will directly affect the market's pricing logic for the April meeting, thereby shaping the short-term exchange rate range.
The above content is all about "[XM Foreign Exchange Platform]: Oil price soared to 110 US dollars, USD/JPY 161 disaster?" It was carefully www.xmniubi.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!
After doing something, there will always be experiences and lessons learned. In order to facilitate future work, the experience and lessons of past work must be analyzed, researched, summarized, concentrated, and understood at a theoretical level.
Disclaimers: XM Group only provides execution services and access permissions for online trading platforms, and allows individuals to view and/or use the website or the content provided on the website, but has no intention of making any changes or extensions, nor will it change or extend its services and access permissions. All access and usage permissions will be subject to the following terms and conditions: (i) Terms and conditions; (ii) Risk warning; And (iii) a complete disclaimer. Please note that all information provided on the website is for general informational purposes only. In addition, the content of all XM online trading platforms does not constitute, and cannot be used for any unauthorized financial market trading invitations and/or invitations. Financial market transactions pose significant risks to your investment capital.
All materials published on online trading platforms are only intended for educational/informational purposes and do not include or should be considered for financial, investment tax, or trading related consulting and advice, or transaction price records, or any financial product or non invitation related trading offers or invitations.
All content provided by XM and third-party suppliers on this website, including opinions, news, research, analysis, prices, other information, and third-party website links, remains unchanged and is provided as general market commentary rather than investment advice. All materials published on online trading platforms are only for educational/informational purposes and do not include or should be considered as applicable to financial, investment tax, or trading related advice and recommendations, or transaction price records, or any financial product or non invitation related financial offers or invitations. Please ensure that you have read and fully understood the information on XM's non independent investment research tips and risk warnings. For more details, please click here