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Yen Hovers Near Multi-Decade Lows as Traders Test Tokyo's Intervention Resolve
The Japanese yen fell against major currencies in Tuesday trading, languishing near multi-decade lows as market participants tested the resolve of Japanese authorities to prop up the currency. The lack of official intervention during a recent U.S. holiday period has emboldened traders to push the yen lower.
Key Currency Levels
The yen weakened past the 162 per dollar mark in early Asian trade, according to a Reuters report. The currency also neared its lowest level against the British pound since 2007, trading at 217.09. Against the euro, the yen stood at 185.47 after the common currency gained 0.5% in the prior session.
Market analysts noted that the absence of yen-buying by Tokyo has been a key factor in its recent decline. "There had been speculation at the end of last week that Japan could intervene again to support the yen during the U.S. holiday when trading conditions were less liquid, but no action has been taken, contributing to the yen giving back some of its recent gains," said Lee Hardman, a senior currency analyst at MUFG.
AdBroader Market Dynamics
While the yen weakened, the U.S. dollar was on less stable footing against other currencies following a recent U.S. jobs report that came in below expectations. This data has led investors to reduce bets on Federal Reserve rate hikes this year. The euro edged higher to $1.1442, and the British pound reached a two-week high of $1.34005.
Market pricing now implies approximately 29 basis points of Fed rate cuts by December, a decrease from about 38 basis points a week ago. However, some strategists believe the market may be underestimating the central bank's path. "We still think that the FOMC will have to start tightening from December," said Carol Kong, a currency strategist at Commonwealth Bank of Australia, who noted that the extent of expected hikes is below the bank's own expectations. Investors are now awaiting the minutes from the Fed's June meeting, due on Wednesday, for further insight into the rate outlook.