Fed's Rate Hold Widens the Yield Gap—and Pressures the Yen

The Federal Reserve held rates at 3.50–3.75 percent on June 17, maintaining the yield advantage that fuels carry trades in the yen. When US assets pay more than yen ones, traders borrow cheap yen to buy dollar instruments, weakening the currency. Each Fed pause delays rate cuts that would narrow this gap, keeping structural pressure on the yen.