Dollar at a 13-month high; the yen nears Tokyo’s intervention line

  • June 25, 2026
  • Posted by: EWGFX
  • Category: news
No Comments

The dollar is firmer against every major. The dollar index is around 101.7, its strongest since March 2025, up about 2.5% on the month; the euro sits near 1.16 despite the ECB’s June hike to 2.25%, and sterling is soft. The move is rate-driven rather than risk-off, and the yen is bearing the brunt.

USD/JPY is around 161.5, its weakest since 1986. The Bank of Japan raised its policy rate to 1% this month, but a gap of 250 to 275 basis points to the US still pays the carry, and the pair has pushed to just below 161.95, the 2024 high that drew official intervention last time. Finance Minister Katayama has escalated her warnings and confirmed a standing agreement with US Treasury Secretary Bessent to coordinate if needed; the record 30 April intervention has since been fully unwound. It is a fundamentally justified move grinding into a level the authorities have defended before, and the asymmetry is sharp: another leg higher invites a fast, official-led snapback that would run through the yen crosses and unwind carry at speed.

Behind the dollar is the Fed. The 17 June FOMC held at 3.50 to 3.75% but dropped its easing bias and committed to deliver price stability; the projections flipped the median end-2026 dot to a hike, 3.8% from 3.4%. Today’s PCE backed the stance, headline at 4.1%, core at 3.4%, the firmest core since October 2023, and CME FedWatch now prices a hike at better than even by September, near 61%, and about 30% by July, both eased from their post-FOMC peaks.

That support is real but conditional. The inflation driving the Fed is energy-led, and the impulse is fading: crude is back to pre-war levels as the Strait of Hormuz reopens and US pump prices have dropped through June, so May should mark the headline peak. Core is the swing factor: if it follows headline down, the dollar’s rate premium erodes into the autumn; if services stay sticky, the bid holds. The Fed’s own forecasts, lifting end-2026 core to 3.3%, lean to the sticky side.

For the FX desk the regime is a firm dollar with the tail risk concentrated in one pair. The trend is long dollar; the sharp, fast risk is a yen snapback at 161.95. Watch core over headline in the June data, the FedWatch odds, and that line in USD/JPY.