Yen Strengthens on Safe-Haven Demand

The Japanese yen weakened to around 161.5 per dollar on Monday, hovering near its lowest level since 1986 as repeated verbal interventions from Tokyo failed to halt the currency’s decline. Finance Minister Satsuki Katayama said authorities stood ready to take appropriate action against excessive currency moves at any time, echoing earlier warnings. The yen has now surrendered all the gains made on April 30, when officials carried out a record-sized market intervention to support the currency. The latest drop came despite the Bank of Japan’s ongoing policy normalization, including a 25-basis-point interest rate increase to 1% last week. The currency also remained under pressure from heavy carry-trade activity, as investors continued to favor short yen positions amid the still-wide interest rate gap between Japan and the US.

The Japanese yen weakened beyond 161 per dollar on Friday, approching again the lowest level since 1986 despite renewed verbal intervention from Japanese authorities. Chief Cabinet Secretary Minoru Kihara said on Thursday that the government remains prepared to respond to excessive currency movements whenever necessary. The yen has now erased all the gains recorded on April 30, when authorities conducted a record-sized intervention to support the currency. The latest decline came despite the Bank of Japan’s gradual tightening cycle, including a 25-basis-point rate hike to 1% earlier this week aimed at addressing an energy-driven inflation shock linked to the Middle East conflict. The dollar also strengthened following the Federal Reserve’s decision to leave interest rates unchanged while signaling increasing support for additional rate hikes later this year. The widening policy divergence between Japan and the US continued to weigh on the Japanese currency.

The Japanese Yen touched 160.80 against the USD, the lowest since July 2024. Over the past 4 weeks, US Dollar Japanese Yen gained 1.07%, and in the last 12 months, it increased 10.6%.