As trading resumed after Japan's holiday, the yen's decline continued and
USD/JPY has approached the key 160 level after two weeks of weakness.
Strategists say that following the Bank of Japan's September rate hike, renewed
depreciation would make 160 a critical test of Tokyo's tolerance for a weaker
yen. Commonwealth Bank of Australia FX strategist Carol Kong said if U.S.
Treasury yields keep rising and markets probe Japan's willingness to defend the
currency, USD/JPY could soon break 160. A rapid break would materially raise the
likelihood of official intervention, particularly after recent reports the Bank
of Japan has been conducting "exchange-rate checks".
