The Japanese yen reached a fresh 34-year low, dipping below the 157 level against the US dollar, following the Bank of Japan’s indication that monetary policy would remain accommodative. This sparked speculation that authorities might intervene in the market to halt the yen’s decline.
The yen weakened by as much as 1.1% during the day, hitting a session low of 157.40 per dollar in late morning trading in New York. The decline occurred after the BOJ’s policy meeting, where the central bank decided to keep its key interest rate unchanged. Governor Kazuo Ueda’s remarks during a news conference did little to bolster the currency.
Despite a US inflation gauge meeting expectations and easing concerns about persistent price pressures that could delay Federal Reserve rate cuts, the yen continued its downward trajectory.
With a 10% decrease in value against the greenback this year, the yen stands as the weakest performer among the Group-of-10 currencies. This depreciation is attributed to the significant gap between US interest rates, which are at their highest levels in decades following the Fed’s aggressive tightening cycle, and Japanese borrowing costs, which remain near zero.
Investors, including Justin Onuekwusi, chief investment officer at St James Place Management, express concerns about the yen’s remarkable weakness. Policymakers have warned against excessive depreciation, with Finance Minister Shunichi Suzuki reiterating the government’s commitment to respond appropriately to foreign exchange movements.
Following the BOJ decision, the Topix share index rose by 0.9%, with real estate companies extending gains. Additionally, the yield on the benchmark 10-year bond edged lower to 0.925% from an earlier 0.93%.
Analysts, such as Charu Chanana from Saxo Capital Markets, anticipate potential intervention to halt the yen’s decline, emphasizing the need for coordinated efforts and hawkish policy messaging for effective results.
Traders are closely monitoring key levels, such as 157.60 against the dollar, based on comments from Masato Kanda, the top currency official at the finance ministry. The possibility of intervention increases if the yen continues to fall rapidly, as witnessed after the BOJ decision in September 2022.
Japan’s first yen-buying intervention since 1998 occurred in September 2022, following dovish comments by then-governor Haruhiko Kuroda. The intervention spanned three occasions through October of that year, amounting to over ¥9 trillion ($57 billion).
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