U.S. markets open in 46 minutes
  • S&P Futures

    3,919.25
    +3.00 (+0.08%)
     
  • Dow Futures

    31,490.00
    +3.00 (+0.01%)
     
  • Nasdaq Futures

    12,150.25
    +9.75 (+0.08%)
     
  • Russell 2000 Futures

    1,763.40
    +1.70 (+0.10%)
     
  • Crude Oil

    107.82
    +0.20 (+0.19%)
     
  • Gold

    1,832.40
    +2.10 (+0.11%)
     
  • Silver

    21.35
    +0.23 (+1.09%)
     
  • EUR/USD

    1.0561
    +0.0002 (+0.02%)
     
  • 10-Yr Bond

    3.1850
    +0.0600 (+1.92%)
     
  • Vix

    28.26
    -0.79 (-2.72%)
     
  • GBP/USD

    1.2244
    -0.0026 (-0.21%)
     
  • USD/JPY

    135.4820
    +0.3120 (+0.23%)
     
  • BTC-USD

    21,240.62
    -398.10 (-1.84%)
     
  • CMC Crypto 200

    462.97
    +9.07 (+2.00%)
     
  • FTSE 100

    7,244.65
    +35.84 (+0.50%)
     
  • Nikkei 225

    26,871.27
    +379.30 (+1.43%)
     

Yen Slides to Two-Decade Low, Reigniting Focus on Intervention

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
Yen Slides to Two-Decade Low, Reigniting Focus on Intervention
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

(Bloomberg) -- The yen extended a twenty-year low against the dollar Tuesday, weighed down by the widening gap between yields in Japan and the US, stoking speculation over potential intervention.

Most Read from Bloomberg

The currency fell as much as 0.8% to 132.96 per dollar -- the lowest since April 2002 -- with benchmark Treasury yields trading above the closely-watched 3% level. It slid to a seven-year low against the euro and the Australian dollar, heaping pressure on a Japanese government facing a backlash over rising prices.

Japanese companies and households have become increasingly vocal about the negative effects of the weaker yen, as input and energy costs soar. A further slide will put pressure on the consensus between a central bank determined to stoke inflation and a government desperate to avoid a cost-of-living crisis ahead of a national election in coming months.

Yen’s Historic Fall Signals Rewrite of Global Currency Playbook

“The Bank of Japan is now the only central bank among developed nations which isn’t tightening monetary policy and this has strengthened yen crosses, leaving the yen as the only loser,” said Takuya Kanda, general manager at Gaitame.com Research Institute in Tokyo. “The next target technically is 135.15, so 132 and 133 are just passing levels toward that target.”

The yen has been in freefall this year as a dovish BOJ keeps local yields anchored in a bid to boost a moribund economy while US equivalents surge on rising interest-rate expectations. The currency has also suffered from Japan’s position as an energy importer, at a time of rising oil prices.

On Tuesday, Japan’s Finance Minister Shuichi Suzuki said the government is monitoring the currency with a sense of urgency, and repeated that disorderly moves can have negative impact.

A Trader’s Guide to Japanese Policy Makers’ Language on the Yen

In a speech on Monday, Bank of Japan Governor Haruhiko Kuroda affirmed that policy tightening still wasn’t on the table, indicating that the economy still needs more time to recover as the country lacks enough wage growth. “In this situation, monetary tightening is not at all a suitable measure,” he said, suggesting the bank focus instead on bolstering economic activity.

Kuroda’s comments helped accelerate yen selling by highlighting monetary policy divergence, said Jun Kato, chief market analyst at Shinkin Asset in Tokyo. They came ahead of the Reserve Bank of Australia’s key rate hike by a greater-than-expected 50 basis points, while the European Central Bank is expected to announce an end to bond purchases this week before an increase in borrowing costs in July.

“Yen crosses are prone to rise, with markets pricing in the European Central Bank’s rate hikes while Australia is also firmly rooted in a rate hike trend to drive the yen lower against the Australian dollar,” said Kato.

The divergence between the dollar and yen isn’t likely to reverse course anytime soon, according to Brendan McKenna, a strategist at Wells Fargo.

“We expect the Fed to keep hiking and for the Bank of Japan to keep rates on hold for the foreseeable future,” he said. “As long as those dynamics are present, the yen should keep weakening.”

(Updates throughout)

Most Read from Bloomberg Businessweek

©2022 Bloomberg L.P.