FX.co ★ Yen dives back to July’s lows

Tough times have hit the Japanese currency. According to Bloomberg, the yen has taken a significant hit against the US dollar. For the first time since July, the dollar/yen pair crossed the 155.00 mark. This is a worrying sign! Such a scenario increases the risk of currency intervention by Japanese authorities.

During the period between November 11 and 16, the dollar/yen pair peaked at 155.16 before pulling back slightly to trade just below the 155.00 level.

Analysts observe that the yen continues to weaken following Donald Trump's election as US president. The currency is under pressure due to rising US Treasury yields, with two-year bond yields hitting their highest point since July 2024.

The yen’s current decline has reached levels where the Japanese government previously intervened in the market to stabilize the currency. Experts believe Japan’s authorities took these measures to support the yen.

Bloomberg reports that, according to top economists, the intervention threshold for October was estimated at 150 yen per US dollar.

Trump’s inflationary and expansionary economic policies play a significant role here. These policies may slow the Federal Reserve’s rate-cutting pace and further weaken the yen. Adding fuel to the fire is the market’s doubt about the speed at which the interest rate gap between Japan and the US will close.

In 2024, Japan’s government spent a record-breaking ¥9.8 trillion ($63 billion) on interventions in late April and early May. Additionally, ¥5.5 trillion was allocated in early July, when the yen hit its lowest level since 1986.

The prolonged weakness of the yen might push the Bank of Japan to raise interest rates sooner than anticipated.