(Bloomberg) -- The yen weakened through the closely watched level of 152 per dollar, increasing speculation that Japanese authorities will step into the market to support the currency.
- Dollar-yen rate hits highest since 1990 after US CPI data
- Japan officials have ramped up warnings about yen weakness
The Japanese currency fell as much as 0.6% to 152.70 versus the greenback, the weakest level since 1990, as the dollar rallied after US inflation topped forecasts. Currency watchers have been saying the yen may have even further to fall before authorities step in even as the nation’s policymakers ramped up warnings about the yen’s tumble in recent weeks. Top currency official Masato Kanda said that speculative moves are driving the trend.
“The ease with which we went through 152 — the supposed line in the sand for the Ministry of Finance and the Bank of Japan — would suggest that their pain threshold maybe higher,” said Valentin Marinov, head of G-10 currency strategy at Credit Agricole.
Finance Minister Shunichi Suzuki has said that he was watching the market with a high sense of urgency and wouldn’t rule out any steps to address excessive moves. Prime Minister Fumio Kishida, who is visiting the US this week, has warned against the yen’s slide, pledging to act appropriately. Kishida is set to meet with President Joe Biden Wednesday.
“Last time they intervened in September 2022 Kishida was also in town,” said Brad Bechtel, global head of FX at Jefferies Financial Group Inc. “I don’t think we have a big enough move in USD/JPY to spark intervention.”
A measure of underlying US inflation topped forecasts for a third straight month, likely delaying the Federal Reserve’s first interest-rate reduction. Traders are now shifting rate cut expectations to November from September, pricing two cuts this year after many had previously expected three.
The yen dropped less than most of its peers in the developed world. The Swedish krona and the Australian dollar fell more than 1.5%, with all Group-of-10 currencies weakening against the greenback on Wednesday. A gauge of dollar strength jumped the most in two months.
The yen has faced renewed downward pressure recently after the BOJ ended the negative interest rate policy in March, but without providing guidance on additional rate hikes and signaling that financial conditions will be kept easy.
Expectations that the Fed may delay interest-rate cuts this year have helped US Treasuries keep a wide yield premium versus Japanese bonds while bolstering the dollar, including against the yen.
Authorities in Tokyo spent ¥9.2 trillion ($61 billion) in 2022 to prop up the yen on three occasions. The yen is now much weaker than then, when they intervened in the currency market for the first time since 1998.
“The yen is through that 152 level, but it’s a move that is in line with the rest of the Group of 10,” said Helen Given, a foreign-exchange trader at Monex. “I do believe intervention now is more likely than not.”
