Japanese Yen slides past 160 against the US Dollar, a first since 1990

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The yen tumbled past yet another psychological milestone for the first time since 1990, raising questions about why the Japanese authorities don’t appear to have stepped in to support the currency.

The Japanese currency dropped as much as 1.2% to 160.17 per dollar on Monday amid thinned liquidity due to a local public holiday, before trading at 159.17 as investors pile on bearish positions ahead of the Federal Reserve’s meeting later this week.

“Will a dog chase an airborne frisbee? Yes, markets appear to be trying to push dollar-yen towards 160 in the absence of official intervention,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore. “It shows extreme speculation in the spot and options space as well, and how investors are so hyper-sensitive to anything yen and risk of intervention.”

The move in the yen comes before the US central bank is scheduled to hold a policy meeting during which it may signal the need to keep interest rates elevated amid sticky inflation — a move that will support the dollar and undermining the appeal of yen assets.

The Bank of Japan last week indicated financial conditions will remain easy, though policymakers have repeatedly warned that depreciation won’t be tolerated if it goes too far too fast. Earlier this month, the nation’s finance minister also flagged concerns over the yen’s decline to US Treasury Secretary Janet Yellen, which market participants saw as laying the groundwork for intervention.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow