The yen remained close to a four-month low against the U.S. dollar and a 16-year low against the euro on Wednesday, reflecting expectations that Japan’s monetary policy will continue to remain accommodative despite the Bank of Japan’s recent rate hike.
Following Japan’s first rate hike in 17 years, the Bank of Japan emphasized its commitment to maintaining accommodative conditions for the foreseeable future. This stance, coupled with significant rate differentials between the U.S. and Japan, has exerted downward pressure on the yen.
On Wednesday, the yen weakened to a four-month low of 151.58 against the dollar and was last down 0.47% at 151.56. Analysts note that the 152 level remains a key focus, with potential intervention by Japanese authorities looming if the yen continues to strengthen.
The yen’s decline extended across multiple currencies, with notable weakness against the euro and the pound. Against the euro, the yen fell to 164.66, its lowest level since 2008, while against the pound, it slipped to 192.75, the lowest since 2015. Japanese markets were closed for a holiday on Wednesday.
The Bank of Japan’s decision to end eight years of negative interest rates has reaffirmed the view that the yen carry trade remains viable. Low Japanese rates have made the yen a popular funding currency for carry trades, contributing to its recent weakness.
Meanwhile, attention remains on the Federal Reserve, with its economic projections and comments from Chair Jerome Powell in focus. Last week’s stronger-than-expected inflation reports have led to reduced expectations of rate cuts, with traders now pricing in 73 basis points of easing this year, down from 150 bps earlier in the year.
The dollar index, which measures the U.S. currency against six major rivals, edged slightly higher to 103.90. The euro was steady at $1.0866. Elsewhere, the Australian dollar touched a three-week high against the yen, while cryptocurrencies, led by bitcoin, experienced some volatility, falling to a two-week low of $60,780 before rebounding slightly.