FX.co ★ Yen Languishes Near 4-Decade Low

The Japanese yen hovered near a four-decade low at around 163.8 per US dollar, as repeated warnings of possible intervention failed to arrest its slide amid broad-based US dollar strength. Traders largely brushed aside comments from Japan’s finance minister that the government stands ready to take decisive action in the foreign exchange market if necessary, as well as reports that Bank of Japan officials are open to raising interest rates faster than markets currently anticipate.

Sentiment toward the yen has also been dampened by concerns over Prime Minister Sanae Takaichi’s fiscal policy, while escalating US-Iran tensions have intensified worries about Japan’s energy security, given the country’s heavy dependence on imported fuel. At the same time, Japan’s headline inflation accelerated to a six-month high in June, reinforcing expectations for further interest rate hikes.

The yen has declined 0.8% so far this week, putting it on course for its worst weekly performance since May, when it weakened following Japan’s record-sized currency intervention.