Yen Slumps to Multi-Decade Low

27 Jun 2024 , 09:10 AM

On Thursday, the yen fell to a 38-year low and battled to stay below 160 per dollar, leaving markets on edge for any hints of Japanese government intervention to support the currency.

In the broader market, the dollar was on the front foot, nearing an eight-week high versus a basket of currencies, aided by a weaker yen and rising in tandem with US Treasury yields.

In the early Asian session, the yen nudged up 0.1% to 160.63 per dollar, although it remained only a fraction of a point above Wednesday’s low of 160.88, its lowest level since 1986.

The Japanese yen has plummeted 2% this month and 12% year to date against a resilient greenback, as it continues to be hit by huge interest rate differentials between the United States and Japan, which has kept the yen appealing as a financing currency for carry trades.

A carry trade involves borrowing in a currency with low interest rates and investing the proceeds in higher-yielding assets.

Nonetheless, the yen’s recent slip over the critical 160 per dollar level has left traders concerned about possible intervention from Tokyo, after officials spent 9.79 trillion yen ($60.94 billion) at the end of April and early May to boost the currency 5% from its 34-year low of 160.245.

While the risk of intervention has increased, analysts believe Japanese authorities may wait until Friday’s release of the United States’ personal consumption expenditures (PCE) price index before entering the market.

Sterling struggled to recover from the previous session’s over-one-month low of $1.2616, and was last bought at $1.2622, surrendering to a stronger dollar.

The euro, which plummeted to its lowest level since early May on Wednesday, was last seen at $1.0680, up 0.01%.

The euro was on course to lose nearly 1.5% of its value this month, driven down by political upheaval in the eurozone ahead of France’s snap election, which begins this weekend.

Meanwhile, the dollar index remained near a two-month high of 106.05, bolstered by higher US Treasury yields. [US/]

The benchmark 10-year yield increased two basis points to 4.3392% on Thursday, while the two-year yield was last at 4.7576%.

An unexpected increase in Australian inflation on Wednesday caught traders off guard and encouraged markets to raise the prospect of another interest rate hike this year, sending domestic rates higher.

That provided the Australian dollar a tiny boost in the previous session, but it was short-lived as the Antipodean currency struggled to hold its gains against a stronger dollar.

The Australian dollar closed 0.02% lower at $0.6646, while the New Zealand dollar slipped 0.07% to $0.6079.

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