The U.S. dollar has risen to its highest level against the Japanese yen in more than 32 years and will likely keep climbing as the central banks in the U.S. and Japan continue to move in opposing policy directions.

The yen-to-dollar rate rose above 150.00 on Oct. 21, its highest level since August 1990, after two days of emergency bond-buying operations by the Bank of Japan, or BoJ, and a $20 billion intervention launched in late September aimed at limiting the yen's decline.

The yen has lost more than 23% to the dollar since the start of the year, with more room to fall as the BoJ sticks to an ultra-loose monetary policy while the Federal Reserve and other central banks worldwide move to tighten policy, currency analysts said. As Japan's central bank continues with its accommodative monetary policy, the Fed has raised its benchmark federal funds rate by 300 basis points since March with another 75 bps hike expected at its meeting in early November.

"I think we will certainly go higher from here," said Derek Halpenny, a managing director with MUFG. "The [Bank of Japan's] intervention clearly did not work and we are not surprised by that. The history of intervention is clear — it fails unless it is backed up by some form of shift in the fundamentals."

A stronger dollar translates into higher costs for U.S. goods in Japan, though U.S. tourists to the country would have increased spending power. Meanwhile, U.S. companies that do business in Japan could see a hit to profits as earnings from the country are worth less when converted into dollars.

The yen's fall against the dollar is likely to persist until the Fed stops its rate-hiking cycle, the BoJ ends its yield curve control policy that keeps its 10-year government bond yield near 0%, or global inflation starts a sharp decline, Halpenny said.

"We think all three of those fundamental drivers will change but not until next year," Halpenny said.

The BoJ is set to meet Oct. 27-28, and without a significant move in policy settings, the dollar-to-yen rate could climb to 160.00 in the relatively near term, said Michael Hewson, chief market analyst with CMC Markets. That would the highest level since 1986.

"The only way we will see a change of trend is if the Fed indicates a pause may be coming, or we get a policy shift from the BoJ," said Hewson. "The risk is that the Bank of Japan shifts policy too late and prompts a big inflation spike in the new year, which they then struggle to control."

Still, it is unclear just what the BoJ's best path forward may be after its intervention in September did little to ease pressure on the currency, said Craig Erlam, a market analyst at OANDA.

"The current situation clearly isn't sustainable if the country wants to avoid seeing the currency plunge," Erlam said. "Declines of this magnitude in such a small amount of time can be damaging especially on importers, not to mention households and businesses given what Japan imports."

Dollar on the rise

The dollar has been on a record tear against other currencies throughout 2022, including the rise to a near-40-year high against the British pound.

Just this month, however, the pound rebounded against the dollar following the resignation of Prime Minister Liz Truss on Oct. 20. The pound fell nearly 21% to the dollar from the start of the year to Sept. 28, but rose just over 4% during the roughly three weeks since.

The pound will see further volatility amid future political uncertainty as the country continues to grapple with high inflation and weak economic growth.