USD/JPY remains steady near 158.50 as attention turns to Japan’s upcoming election

USD/JPY Holds Steady Near Annual Peak Amid Intervention Speculation

During Thursday's European session, the USD/JPY currency pair remains confined to a narrow band around 158.50, hovering just beneath its highest level of the year at 159.45, which was reached on Wednesday. The pair has eased slightly as the Japanese Yen (JPY) finds support, fueled by speculation that Japanese authorities may step in to curb sharp, one-sided movements in the exchange rate.

On Wednesday, Japan's Chief Cabinet Secretary Seiji Kihara emphasized the government's readiness to act if currency fluctuations become excessive, highlighting the importance of stable exchange rates that reflect economic fundamentals.

Despite these reassurances, the future trajectory of the Yen remains unclear, as expectations of a more relaxed fiscal approach this year persist. Market participants are watching for Prime Minister Sanae Takaichi's upcoming budget announcement, which is anticipated to include significant spending initiatives. To secure broader support for these plans, she is reportedly considering calling an early snap election to strengthen her party’s position in the lower house of parliament.

Currently, the ruling Liberal Democratic Party (LDP) lacks a majority in the lower chamber, which has constrained its legislative agenda. However, a Reuters report suggests that Prime Minister Takaichi stands a strong chance of increasing her party’s representation in the upcoming election.

Meanwhile, the US Dollar (USD) has edged slightly higher, buoyed by expectations that the Federal Reserve will maintain current interest rates at its policy meeting later this month. As of now, the US Dollar Index (DXY)—which measures the Greenback’s performance against a basket of six major currencies—has risen 0.1%, approaching its monthly peak at 99.26.

(Correction made at 11:23 GMT: The final paragraph now clarifies that the Fed is expected to keep rates unchanged at this month's policy meeting, not for the entire year.)