Japanese Yen loses ground against US Dollar as attention turns to US Midterm Elections

• Japanese Yen trails major peers even as markets anticipate a hawkish BoJ.
• Intervention remains an option whenever necessary, Japan indicates.
• For the US Dollar, ING anticipates little impact from US Midterm Elections.

Losses against most major peers mark Tuesday’s trading for the Japanese Yen (JPY), with the Australian Dollar (AUD) the exception. Against the Yen, the US Dollar (USD) has gained 0.28% to trade near 158.30.

Expectations of further monetary tightening by the Bank of Japan (BoJ) have not prevented the Asia-Pacific currency from lagging its peers. Financial markets anticipate that the BoJ will stay on that path after last week’s 8–1 vote to keep interest rates unchanged at 1.25%.

In Commerzbank analysts’ reading, the BoJ’s latest assessment “suggested underlying inflation is broadly consistent with the 2% target,” while Governor Kazuo Ueda “emphasised upside inflation risks and the need for further policy normalisation.” Expectations in rate markets also point to gradual yet sustained tightening: Commerzbank notes that “the OIS market is pricing in 20bp hike by end-2026 and a total hike of 69bp by September 2027,” reinforcing that outlook.

Could disorderly currency moves prompt Japan to intervene?

A firmer message on currency stability is emerging from Japanese authorities, according to a Commerzbank note. The bank cites Finance Minister Satsuki Katayama as explicitly “signal[ling] readiness to intervene in currency markets if movements become disorderly.” It also draws attention to her warning that “If there are disorderly movements or excessively speculative moves, we will take action,” reflecting a tougher policy stance on containing excessive Yen volatility.

Ahead of US Midterm Elections later in the North American session, the US Dollar remains under broad pressure. The US Dollar Index (DXY), which measures the Greenback against six major currencies, is trading little changed around 101.85 at the time of writing. That leaves the DXY near Monday’s monthly low of 101.43.

A limited lasting effect on currencies remains ING strategists’ expectation: “we don’t expect today’s US midterm results to cause structural shifts in FX, but the Dollar may face some short-term pressure should the Democrats secure both the House (widely expected) and the Senate (close call).” They base that view on the assessment that “markets fully price in a Republican loss of the House, but only partially a Democratic clean sweep,” adding that “a blue sweep can put some pressure on the Dollar.”

On the potential risks, ING cautions that “fears of tougher regulation could weigh on AI stocks (we’ve recently seen how that can hit the greenback), while markets could price in greater risks of decision-making gridlock around issues such as government funding and the debt ceiling.” Nevertheless, the strategists maintain that “we doubt that’s enough to trigger a structural directional shift in the Dollar.”

USD/JPY Technical Analysis: Can the Mildly Bullish Bias Hold?

A mildly bullish near-term outlook persists on the daily chart, where USD/JPY is trading at 158.29, above its 20-day Exponential Moving Average (EMA) of 157.80. The pair continues to respect trend support, with the upward-sloping 20-day EMA below spot indicating a constructive underlying tone. At 55.33, the Relative Strength Index (RSI) remains in neutral-to-positive territory, pointing to steady upward pressure rather than an overstretched advance.

The 158.29 zone serves as the immediate downside support and a near-term pivot. Below it, buyers are likely to defend the broader uptrend at the 20-day EMA of 157.80. This dataset shows no significant technical resistance immediately above current prices, leaving scope for the pair to test higher levels provided spot stays above the 157.80 region and momentum holds steady.

(The technical analysis of this story was written with the help of an AI tool. Know more.)