• USD/JPY advances beyond 159.00, after rallying about 1.6% over the last two weeks.
• The Dollar has retraced about two-thirds of the reversal triggered by the alleged April 30 intervention.
• High Oil prices and the relatively low Japanese bond yields are keeping the yen on the defensive.

The US Dollar (USD) remains moderately bid against the Japanese Yen (JPY) on Friday, crawling up above 159.00, and nearing 160.00, allegedly the limit of tolerable JPY weakness for Tokyo. The pair trades at 159.12 at the time of writing, after rallying about 1.6% over the last two weeks, retracing two-thirds of the ground lost after a likely intervention on April 30.

Traders are aware that Japanese authorities are resolved to stem speculative moves against the Yen, but high Oil prices and comparatively lower Japanese Bond (JGB) yields are throwing JPY to the wolves.

US Treasury Secretary Scott Beseent encouraged the Bank of Japan (BoJ) to keep hiking interest rates to support the Japanese Yen after a visit to Tokyo earlier this week, but Japanese inflation data throws a spanner in the BoJ’s tightening plans.

Japan’s National Consumer Price Index (CPI) figures released earlier on Friday revealed that inflationary pressures abated in April, with the National CPI easing to a yearly rate of 1.4% from 1.5% in March, and the key core CPI slowing down to a 1.4% growth in the 12 months to April, well below the 1.7% expected,, following a 1.8% increase in March.

To make things worse, the minutes of April’s US Federal Market Open Committee (FOMC) released earlier this week showed an increasing openness to hike interest rates if inflationary risks keep rising. Recent US data, namely the strong manufacturing activity released on Thursday, endorses this view and supports the wide US-Japan yield gap that is crushing the JPY.