(April 30): The yen slid past the key 160-per-dollar level as the currency traded under pressure following the Bank of Japan’s (BOJ) April meeting, at which governor Kazuo Ueda refrained from providing a clear sign concerning the timing of the central bank’s next interest-rate hike.
The renewed weakness is likely to heighten concern among Japanese policymakers. Prior to the BOJ decision early on Tuesday, Minister of Finance Satsuki Katayama said authorities are standing by to respond to foreign-exchange moves as needed around the clock as Tokyo remains on high alert over speculative moves that are weighing on the currency.
Investors also remain on edge as the US and Iran vie for control of the Strait of Hormuz after Tehran proposed an interim deal to reopen the key shipping passage following stalled peace talks. The uncertainty has supported the dollar and kept oil prices elevated, adding to inflation in Japan while also raising downside risks to growth.
“We believe intervention is likely to materialise ahead of the cycle high of 162” in the dollar-yen pair, said Ikue Saito, a strategist at JPMorgan.
The moves in Japan’s currency also come alongside broader strength in the dollar heading into the conclusion of the Federal Reserve’s own policy meeting on Wednesday. Officials led by chair Jerome Powell are widely expected to keep rates on hold, with traders focused on any forward guidance offered by the central bankers amid the ongoing conflict in the Middle East. The Bloomberg Dollar Spot Index gained about 0.2% as of 10.30am in New York.
The weakening in the yen resumed even after traders in the interest-rate swaps market ratcheted up expectations for a rate hike by June to around 66%.
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“The Ministry of Finance will be hoping for some dovish indications from the Fed today,” said Jane Foley, head of foreign-exchange strategy at Rabobank. “Failing that, there is risk that the government could attempt to make use of the Japanese holiday period to get the most bang for its buck if it finally intervenes.”
“Firm US yields and elevated oil prices are underpinning the dollar bid, and the yen looks vulnerable to a squeeze if that range high gives way. With the FOMC [Federal Open Market Committee] decision due later today, timing risk is high and any hawkish tilt could accelerate the move and trigger stops above the range,” Brendan Fagan, Markets Live strategist at Bloomberg Strategists.
A breach of the yen’s year-to-date weak point of 160.46, hit on March 30, would take the yen back to levels last reached in mid-2024.
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Authorities intervened in the market several times in 2024 when the yen weakened towards the 160-per-dollar level, though officials have repeatedly emphasised that they are focused on excessive volatility rather than defending specific rates.
Beyond current levels, ¥161.95 looms large as a potential milestone for weakness, given it’s the nadir for the yen reached in 2024. Breaking that level would take the currency back to where it traded in 1986.
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