# DBS Sees More Room For The Yen To Rise As Carry Trade Bets Unwind

> DBS Group Research says the Japanese Yen has become 2026's best performing Dollar Index currency, and sees more upside after a fading carry trade and the joint US-Japan intervention reinforced its haven appeal.

**Type:** article · **Category:** Market · **Published:** 2026-09-08 · **Source:** TrendKia
**Canonical:** https://trendkia.com/en/market/dbs-ka-kahana-hai-kairi-treda-tutane-se-japanese-yen-men-aura-majabuti-ki-gunjaisha-29597 · **Language:** English
**Tags:** Japanese Yen, USD/JPY, Carry Trade, DBS, US Treasury, Scott Bessent, Dollar Index

Among the major currencies making up the US Dollar Index, the Japanese Yen has quietly become 2026's biggest winner, and analysts at DBS Group Research believe the move against the Dollar is far from finished. USD/JPY has dropped beneath the 156.70 level it closed at the end of 2025, and DBS economist Philip Wee argues that a broken technical trendline means the pair could fall further from here.

## From laggard to leader
For much of Trump's second term, the Yen struggled to hold its ground even during bouts of market stress, a sign that its old reputation as a haven currency was under strain. That picture has now flipped. Wee's note shows the Yen has climbed 1.5% against the Dollar so far this year on an overnight basis, enough to make it the best performing currency inside the DXY basket in 2026. Slipping below the 156.70 mark it held at the close of last year is a milestone on its own, but Wee points to a bigger technical development: USD/JPY has broken through a major trendline, a shift chart watchers read as opening up more room for the pair to fall rather than bounce back toward its old range. The DXY basket weighs the Dollar against six major peers, with the Euro carrying the largest share and the Yen the second largest, so a move of this size registers clearly across the index as a whole.

## The intervention that reset the floor
Much of the shift traces back to late July, when the United States and Japan carried out a joint intervention in the currency market. Wee calls it a turning point. "The joint US-Japan intervention in late July was a game changer that established a stronger official backstop against disorderly JPY depreciation," he said. In practical terms, a joint intervention signals that Washington and Tokyo are both willing to act together to stop the Yen from sliding too fast or too far, which reduces the incentive for traders to keep betting against it. That kind of coordinated official support tends to linger in the market's memory long after the intervention itself has ended, because it raises the risk of standing in front of the two governments again. Policymakers in Tokyo have historically worried less about the Yen's direction than about the speed of its swings, since abrupt moves complicate import costs and corporate earnings forecasts for exporters.

## Washington inherits the fiscal worry
A second shift came from the US Treasury. On August 18, Treasury Secretary Scott Bessent announced plans to double buybacks of long-dated US Treasuries. According to Wee, that decision effectively moved fiscal deficit worries off Tokyo's desk and onto Washington's. For months, part of the pressure on the Yen had stemmed from unease over Japan's own government borrowing; with Bessent's buyback plan now drawing attention to the scale of US debt issuance instead, that particular headwind for the Yen has eased, even as it raises fresh questions about Washington's own fiscal picture.

## A fading carry trade restores the Yen's haven appeal
The most significant piece of the puzzle, in Wee's view, is that the Yen's gains are not limited to the Dollar alone. He describes this broadening as weakening the carry trade, the strategy in which investors borrow in a low-yielding currency like the Yen to fund purchases of higher-yielding assets elsewhere. When that trade is popular, it keeps a lid on the Yen because investors are constantly selling it to fund other bets; when it unwinds, as Wee says is happening now, those same investors buy back Yen to close out their positions, adding fresh upward pressure. Wee notes that this carry trade had been undermining the Yen's traditional status as a haven currency through much of Trump's second term, and that its unwinding is now helping restore that role.

## What DBS is watching next
Put together, DBS reads these threads as pointing toward continued Yen strength rather than a quick reversal. The trendline break argues for more downside in USD/JPY on the charts, the late July intervention has raised the cost of betting against the Yen, the fiscal spotlight has shifted to Washington rather than Tokyo, and a fading carry trade is doing the work that used to fall on the Yen's own haven credentials. None of the four is treated as noise in the note, and together they explain why a currency that had been out of favour is now the standout gainer inside the Dollar Index this year. For a currency that spent much of the past two years near multi-decade lows, the shift marks a striking turnaround.

## What this means for you
A stronger Yen and a weaker Dollar trend ripple beyond currency trading desks into everyday costs tied to Japan and to global risk assets.

- **Travellers to Japan:** A firmer Yen means fewer Yen for every Dollar or Rupee converted at the airport or bank. Anyone planning a Japan trip should expect hotel, shopping and food costs in Yen terms to feel comparatively pricier than earlier this year.
- **Importers and exporters trading with Japan:** Businesses paying Japanese suppliers in Yen will see input costs rise as the currency strengthens, while Indian exporters selling into Japan could see their goods become relatively cheaper for Japanese buyers. Contracts due for renewal should factor in the shift.
- **Currency and index traders:** DBS flags more downside risk for USD/JPY after the trendline break, so traders holding Dollar-Yen positions or DXY-linked products should watch for continued Yen strength rather than assume the pair reverts to its 2025 range.
- **Anyone tracking US fiscal news:** With deficit concerns shifting toward Washington after Bessent's buyback announcement, US Treasury market moves are now more likely to set the tone for the Dollar than Japan-specific news, worth watching for anyone holding Dollar-denominated savings or investments.

## Why this happened
The Yen's turnaround did not happen in isolation. It followed a specific chain of policy moves and market shifts through the second half of 2025 that DBS traces through this note.

- **Official intervention in late July:** A joint US-Japan action in the currency market gave the Yen a strong official backstop, discouraging traders from pushing it lower without expecting pushback from both governments.
- **A shift in fiscal attention:** Scott Bessent's August 18 announcement to double buybacks of long-dated US Treasuries drew fiscal deficit worries away from Tokyo and onto Washington, removing one source of pressure on the Yen.
- **Carry trade unwind:** As the popular strategy of borrowing cheaply in Yen to fund higher-yielding bets elsewhere unwound, investors bought back Yen to close their positions, adding broad-based upward pressure beyond just the Dollar pair.
- **A technical trendline break:** USD/JPY's drop through a major chart trendline reinforced the case for further downside, giving momentum traders another reason to follow the move.

## Questions & Answers

### 1. How much has the Japanese Yen gained this year?
DBS says the Yen has appreciated 1.5% year-to-date against the Dollar on an overnight basis, making it the best performing currency in the DXY basket in 2026.

### 2. What level did USD/JPY fall below?
USD/JPY dropped beneath the 156.70 level it closed at the end of 2025.

### 3. What was the late July US-Japan intervention?
The United States and Japan carried out a joint intervention in the currency market in late July, which DBS says created a stronger official backstop against disorderly Yen depreciation.

### 4. What did Scott Bessent announce on August 18?
US Treasury Secretary Scott Bessent announced plans to double buybacks of long-dated US Treasuries, a move DBS says shifted fiscal deficit worries from Tokyo to Washington.

### 5. What is the carry trade DBS refers to?
It is the strategy where investors borrow in low-yielding Yen to fund purchases of higher-yielding assets elsewhere; DBS says this trade is now unwinding, adding upward pressure on the Yen.

### 6. What does the trendline break mean for USD/JPY?
DBS says USD/JPY has broken through a major technical trendline, which increases the downside risk for the pair going forward.

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