Yen hits 34-year low against dollar
Source: AFP
The yen hit a 34-year low against the dollar on Wednesday, just over a week after the Bank of Japan announced a much-anticipated interest rate hike in a shift away from years of ultra-loose monetary policy.
The unit weakened to 151.97 per dollar, its softest since 1990, before recovering to levels of around 151.72.
The drop came after a top central bank official suggested it would continue to pursue an accommodative policy for the time being, echoing previous comments from the BoJ.
But soon afterwards, the finance minister said authorities would not hesitate to "take resolute action against excessive" forex moves -- raising speculation of a government intervention to prop up the currency.
Over the past two years the yen has sharply weakened from levels of around 115 against the dollar, before Russia's invasion of Ukraine.
While central banks around the world aggressively hiked rates to tackle soaring inflation, the Bank of Japan stuck to its ultra-loose policies, driving down the yen.
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This has been good news for exporters, but not for consumers as it made imports more expensive.
Last week the bank finally took a step away from its unorthodox monetary stimulus programme -- hiking rates for the first time since 2007.
The yen has continued to slide since then, however.
Wednesday's dip came after Naoki Tamura, a BoJ board member, reportedly told business leaders in northern Japan that "slow but steady progress" was needed on scaling back the central bank's long-standing ultra-easy policy.
He repeated a line from a bank policy statement about financial conditions staying accommodative for now, which triggered fresh falls in the yen, Bloomberg News reported.
After the currency hit a 34-year low, Finance Minister Shunichi Suzuki said the government was watching the situation closely.
"We're monitoring market movements with a high sense of urgency. We will take resolute action against excessive moves, without ruling out any options," he told reporters.
The government last intervened in markets to support the yen in October 2022, and on Monday a finance ministry currency diplomat also hinted that it could be on the cards again.
ING said in its morning note on Wednesday that forex markets would "test the verbal intervention of the last few days to see if there is more substance than just words".
Alvin Tan from Royal Bank of Canada added that "intervention concerns" had capped the yen's slide.
But risks of further depreciation remain thanks to factors including "the yen's sizable yield disadvantage", he said.
Source: AFP
