The Japanese yen reached its weakest level against the US dollar since 1986, with bearish traders predicting it could fall as far as ¥170 per dollar. The yen's slide comes amid continued selling of the currency in favor of the higher-yielding greenback and a lack of catalysts to reverse its momentum.
Despite Japan's Ministry of Finance and central bank intervening in late April and early May to support the currency, spending ¥62 trillion ($514 billion), traders remain unfazed. The yield differential between Japan and the US continues to drive investors towards dollar assets, leading to a significant decline in the value of the yen.
Analysts expect further rate hikes from the Bank of Japan in late July, but any durable rally is likely to require Federal Reserve interest rate cuts. The dollar index, which tracks the currency against six peers, rose 0.3% to 105.99 on Friday as traders bet on Fed rate cuts this year.
The euro slipped 0.3% to $1.0683 after European Central Bank policymaker Olli Rehn suggested two more rate cuts this year, contrasting with the Federal Reserve's Michelle Bowman who does not expect any U.S. rate cuts in 2024.
The yen's decline has been a concern for Japanese authorities, who have historically intervened to prevent excessive market moves. However, recent interventions have had little impact on the currency's direction.
The dollar's strength is also putting pressure on other currencies, including the Chinese yuan. China has signaled some tolerance for a cheaper currency by gradually weakening the midpoint of its daily trading range against the dollar.
