The U.S. dollar index (DXY) continued to strengthen, firmly holding above the 101 level. This rally is primarily driven by hawkish shifts in Federal Reserve policy expectations and a rise in short-term U.S. Treasury yields. The USD/JPY pair has subsequently approached the critical threshold of 161.96, raising market concerns that Japanese authorities may step in to intervene in the foreign exchange market.
Meanwhile, a rebound in oil prices has intensified inflation expectations, providing additional support for the dollar. Market sentiment has turned cautious, with investors closely watching three core variables: the timing of the Fed's next rate hike, whether the Bank of Japan will take substantive intervention measures, and the specific impact of rising oil prices on the inflation trajectory.
Amid the tug-of-war between a strong dollar and Japan's intervention red line, the outlook for the carry trade has become a hot topic. Whether the current exchange rate level can be sustained and whether intervention risks could trigger a concentrated unwind of speculative positions remains to be seen.