Yen Hits 160 to Dollar in Thin Trade as Hopes for Near-Term BOJ Rate Hikes Wane

By Kosaku Narioka

The Japanese yen continued to weaken, briefly hitting a new 34-year low of 160 against the dollar, on waning expectations for near-term rate increases from the Bank of Japan.

The yen hit 160 to the dollar in early trade Monday, its weakest level since April 1990, though trading volumes were thin as it was a public holiday in Japan.

The yen was recently at 159.33 to the dollar, compared with 158.34 late Friday in New York.

The yen fell sharply Friday after the Bank of Japan left its interest-rate target unchanged, a month after it made its first rate increase in 17 years, and Gov. Kazuo Ueda disappointed traders who were looking for hints about further rate increases.

Ueda left the door open for more rate increases but suggested recent falls in the yen--which would increase the prices of imported goods--might not trigger immediate BOJ action. Currency weakness "hasn't had a major impact on underlying inflation," he said.

Following the apparent lack of intervention by Japanese authorities on Friday, despite the yen's sharp depreciation, "the market appears to be losing its fear of intervention," said Alvin T. Tan, head of Asia FX strategy at RBC Capital Markets.

He said a lack of liquidity on a Japanese holiday exacerbated the yen's drop Monday morning.

The dollar has strengthened in recent weeks as signs of strong U.S. inflation lessened hopes for a near-tern rate cut from the Federal Reserve. U.S. central bank's two-day policy meeting is scheduled to start Tuesday.

Even if Japanese authorities eventually intervene to support the yen, the currency will likely keep depreciating after a brief respite, as the primary driver of the dollar/yen pair is the interest rate differential, said Vincent Chung, associate portfolio manager for T. Rowe Price's diversified income bond strategy.

He added that the BOJ has said it is focussed mainly on curbing excessive foreign-exchange volatility than specific currency levels, and added that past interventions were mostly ineffective at changing the trend of yen depreciation.

--Ronnie Harui contributed to this article.

Write to Kosaku Narioka at kosaku.narioka@wsj.com

(END) Dow Jones Newswires

April 29, 2024 00:11 ET (04:11 GMT)

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