The US Dollar to Yen exchange rate is trading around 162.66, close to July’s high of 162.84 and its strongest levels in decades.

The pair has gained from around 159.36 at the start of June, although it remains narrowly lower for July after briefly falling to 160.65 earlier this month.

ING believes USD/JPY could break above the 162.75-162.85 resistance area over the coming sessions as higher energy prices support the Dollar and increase pressure on Japan’s trade position.

Deteriorating news from the Gulf has pushed oil, natural gas and refined-product prices higher, reinforcing inflation concerns and reducing investors’ willingness to sell existing Dollar positions.

ING said it was “slightly surprising not to see the dollar a little stronger”, particularly as higher energy prices mean the Federal Reserve must remain alert to renewed inflation pressure.

Japan is particularly exposed to rising energy costs because it relies heavily on imported oil and gas. That backdrop can weaken the Yen while supporting currencies of energy exporters, including the US Dollar.

The bank also noted that Japanese authorities did not intervene during Monday’s Marine Day holiday, leaving traders free to test the upper end of the recent USD/JPY range.

According to ING, “it would not be a surprise to see USD/JPY briefly break above 162.75/85 over coming sessions” if the Bank of Japan remains absent from the market.

ING expects the broader Dollar index to find support near 100.50 and potentially recover towards 101.30, with persistent Gulf tensions and elevated energy prices limiting the scope for near-term Dollar weakness.