FX.co ★ Yen Sinks to 40-Year Low

The Japanese yen weakened past 162 per dollar on Tuesday, its lowest level since 1986, heightening concern among policymakers and keeping investors alert for possible currency intervention by Tokyo. The yen remained under pressure amid the wide interest rate differential between Japan and the United States, with the Bank of Japan proceeding only cautiously with policy normalization, while the Federal Reserve is expected to implement multiple rate hikes this year.

Persistent carry trades and continued demand for the US dollar as a safe-haven asset further weighed on the Japanese currency. At the same time, Japan’s economy remained vulnerable to energy supply disruptions because of its heavy reliance on oil imports from the Middle East. On the economic front, Japan’s industrial production in May rose less than anticipated, underscoring how tensions in the Middle East are affecting supply chains and pushing up energy costs.