The yen experienced a rise on Thursday during Asian trading hours, marking its first positive movement in three days as it attempted to recover from historic lows not seen in 38 years.
This rebound follows a fresh warning from the Japanese government regarding the steep depreciation of the yen, which recently fell below the critical 160 yen per dollar mark, reaching levels last observed in 1986.
Despite this slight uptick, the yen remains under pressure due to rising U.S. 10-year Treasury yields, which are expected to increase further with upcoming U.S. economic growth and unemployment data.
Market Movements
The USD/JPY pair dropped 0.25% today to 160.38 yen per dollar, with a session peak of 160.79, following a 0.7% decline on Wednesday that pushed the yen to a 38-year low of 160.87. The recent downturn occurred after the yen breached the psychologically significant 160 mark, a threshold closely monitored by the Bank of Japan.
Since the Bank of Japan’s policy meeting on June 14, where it decided to maintain its government bond purchase program, the yen has fallen 2% against the dollar. Market participants had anticipated a reduction in bond purchases, which did not materialize.
Government Intervention
Japanese Finance Minister Shunichi Suzuki issued another stern warning, indicating that the authorities are prepared to take necessary actions in the foreign exchange market to curb the yen’s sharp decline. Suzuki emphasized the government’s intent to stabilize the exchange rate and expressed concerns about the economic impact of such volatility.
Potential Bank of Japan Intervention
Data from the Japanese Ministry of Finance revealed that the authorities spent 9.79 trillion yen ($62.23 billion) to intervene in the forex market in an effort to support the yen. This intervention was confirmed to be a two-stage process last month, where the Bank of Japan sold substantial amounts of dollars to bolster the yen, recovering from a previous low of 160.21.
As the yen hit a new low of 160.78, the worst since 1986, questions arise regarding whether the Bank of Japan will intervene once more to support the currency.
U.S. Treasury Yields
U.S. 10-year Treasury yields rose 0.4% on Thursday, continuing their upward trend for the third consecutive session and reaching a two-week high of 4.347%, thereby strengthening the dollar.
These developments precede significant U.S. economic reports, including growth and unemployment claims data, which are expected to influence market dynamics further. Current market expectations for a Federal Reserve interest rate cut of 0.25% in September stand at 62%, with a 75% probability for a cut in November.
The yen’s recent movements reflect the ongoing struggle between domestic efforts to stabilize the currency and external pressures from global financial markets.
