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The yen fell for six consecutive days to a 34-year low, and the risk of Japanese authorities intervening increased

2024-06-21

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The yen posted its longest losing streak since March to a 34-year low, raising the risk that Japanese authorities will have to intervene again to support the currency. The yen fell for a sixth straight session against the dollar on Thursday, closing near 159 yen per dollar, its lowest close since April 1990 and just a stone's throw away from its year-to-date low of 160.17 yen per dollar.

The yen's weakness comes amid a persistent gap between Japanese and major countries' bond yields, including the United States. The Bank of Japan did not previously release details of tapering its bond purchases at its June policy meeting. Without a timetable, traders are looking to see when the Bank of Japan will normalize monetary policy, a move expected to support the yen.

"As long as the U.S.-Japan interest rate differential exceeds a certain threshold, carry trade-induced yen selling is likely to remain unabated, even if the differential narrows," Barclays strategists led by Shinichiro Kadota said in a report. The strategists expect the dollar to trade around 160 yen by the end of this year.

The Ministry of Finance ultimately deployed about $62.7 billion to support the yen in April and May, a move that has eased some of the pressure on the yen. JPMorgan strategists Junya Tanase and Ikue Saito said the Ministry of Finance is ready to intervene again if it deems exchange rate fluctuations "excessive, speculative and deviating from economic fundamentals." They added that the speed of exchange rate fluctuations and their nature, such as fluctuations caused by speculative selling of the yen, "will be key to the (Ministry of Finance's) decision on whether to intervene."

On Thursday, the U.S. Treasury Department announced in a report to Congress that it would add Japan to its foreign exchange monitoring list. In mentioning Japan's interventions in April and May, the report focused on Japan's large bilateral trade and current account surpluses.

It is worth noting that unlike earlier this year when the continued weakness of the yen triggered intervention by Japanese authorities, Japanese officials have seemed more cautious about intervention in recent weeks. In early June, Japanese Finance Minister Shunichi Suzuki said that officials will continue to monitor exchange rate trends, but intervention should be limited.

"I am increasingly convinced that monetary officials are giving up on the yen. The yield gap is now too large, and the United States is only planning to cut interest rates once this year, which will not make a substantial improvement in the short term," said Helen Given, a foreign exchange trader at Monex.

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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The yen fell for six consecutive days to a 34-year low, and the risk of Japanese authorities intervening increased

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