Japanese Yen Hits 39-1/2-year Low

The Japanese yen weakened beyond 162 per dollar on Tuesday to its lowest level since 1986, raising concerns among policymakers and keeping investors alert for potential currency intervention by Tokyo. The yen remained under pressure as the wide interest rate gap between Japan and the US persisted, with the Bank of Japan continuing its gradual policy normalization while the Federal Reserve is expected to deliver multiple rate hikes this year. Ongoing carry trades and sustained demand for the US dollar as a safe-haven currency also continued to weigh on the yen. Meanwhile, Japan's economy remained exposed to disruptions in energy supplies due to its heavy dependence on Middle Eastern oil imports. On the economic front, industrial production in Japan rose less than expected in May, underscoring the impact of Middle East tensions on supply chains and energy costs.

The Japanese Yen touched 161.95 against the USD, the lowest since December 1986. Over the past 4 weeks, US Dollar Japanese Yen gained 1.43%, and in the last 12 months, it increased 12.61%.

The Japanese yen was little changed at around 161.7 per dollar on Monday, remaining close to its weakest level since 1986 despite data showing retail sales rose 5.3% in May, the fastest pace since November 2023, supported largely by a government stimulus package that boosted consumer spending. A string of solid economic data and hawkish remarks from central bank officials reinforced expectations that the Bank of Japan will continue raising interest rates this year. The BOJ is scheduled to announce its next policy decision on July 31. Even so, the yen remained under pressure despite repeated verbal warnings from Japan's Finance Ministry and record currency intervention nearly two months ago, as a stronger dollar and the wide US-Japan interest rate gap continued to weigh on the currency while the Federal Reserve is expected to raise rates later this year.