Strong dollar pushes yen to 40 year low as clock ticks on intervention
The yen slumped to levels not seen since 1986, stoking worries that direct intervention from Tokyo was around the corner, while the dollar backed away from 13-month highs ahead of jobs data that could influence the US rate outlook.
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Video Summary
AI GeneratedThe Japanese yen has hit a 40-year low due to a strengthening US dollar and a significant yield gap between the US and Japan. Despite interventions by Tokyo and recent rate hikes by the Bank of Japan, the yen continues to decline as investors favor higher-yielding US assets, while US inflation and economic growth keep the prospect of further Fed rate hikes alive.
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The steadily climbing dollar pushed the yen down to a 40-year low on Tuesday,
its stoking worries that direct intervention from Tokyo was near.
Japanese Finance Minister Satsuki Katayama reiterated that authorities stood ready to
respond appropriately, but refrained from stronger rhetoric.
The dollar's strength has been most visible on the Japanese yen.
Even with the Bank of Japan's latest rate hike, rates remain far below those in the US.
It leaves a wide yield gap that favours the dollar and sustains carry trades,
in which investors borrow cheaply in yen and invest in higher-yielding currencies.
US inflation is running well above target.
The economy is growing and at this month's Federal Reserve meeting,
policymakers' new quarterly projections showed 9 of 19 now anticipate a rate hike by year-end.
Thursday's US jobs data will be closely watched.
The Japanese currency was set for a 2% drop in the second quarter,
its fourth straight quarter of decline.
Japanese authorities stepped into the market, spending $72.25 billion in April and May,
to support the currency, but the impact of this has already faded.