Yen touches new 34-Year low against US dollar

23 Apr 2024 , 10:59 AM

The yen hovered near a potential 34-year low on Tuesday, under the influence of a robust US dollar, prompting investors to monitor closely ahead of the Bank of Japan's rate decision and significant U.S. inflation data this week.

After hitting its lowest level since the mid-1990s on Monday, the yen remained stagnant, attributed to the stark interest rate differentials between the U.S. and Japan, coupled with eased tensions between Iran and Israel. At one juncture, it traded at 154.76 per dollar.

As the yen approached the 155.00 mark, traders remained vigilant, considering it a critical threshold for potential Japanese government intervention.

The response from Tokyo to the Bank of Japan's (BOJ) upcoming two-day policy meeting, commencing Thursday, remains uncertain.

In anticipated updated forecasts to be unveiled on Friday, the BOJ is expected to project inflation hovering around its 2% target over the next three years, hinting at readiness to potentially raise interest rates from near-zero levels this year.

However, the BOJ faces challenges amid the yen's depreciation, with some market participants speculating potential pressure on the central bank to expedite interest rate hikes to curb the currency's decline.

Japanese Finance Minister Shunichi Suzuki reiterated on Tuesday the commitment of local authorities to collaborate closely with foreign counterparts to address excessive volatility in the foreign exchange market, cautioning against speculative currency movements.

The robustness of the dollar has been evident, marking over 5% gains this year, currently trading at 106.09, slightly below last week's five-month highs.

Market sentiment regarding the Federal Reserve's rate cut has shifted, with a 46% probability priced in for the first cut in September, followed closely by November at 42%. This contrasts with earlier speculation of a June start to the U.S. monetary easing cycle.

Investors anticipate evaluating the American economy's health this week, with Thursday's release of first-quarter GDP data and Friday's unveiling of the Fed's preferred inflation gauge, the personal consumption expenditures (PCE) index.

While the European Central Bank (ECB) and Bank of England (BoE) are anticipated to commence rate cuts by mid-year, September emerges as the favored timeline for the Fed's initial rate reduction, resulting in the euro's significant monthly decline against the dollar.

Meanwhile, sterling touched a new five-month low against the US dollar on Monday, trading at $1.2354.

Among cryptocurrencies, bitcoin saw a slight uptick of 0.51%, reaching $66,879.00.