Yen drops to 34-yr low against US dollar

Japan issued its strongest warning yet on potential currency intervention as the yen hit a 34-year low, trading near 151.97 per dollar, prompting Finance Minister Shunichi Suzuki to signal readiness for action, Bloomberg reported on Wednesday.

Policymakers are considering purchasing the currency to support it after the Bank of Japan’s (BOJ) recent interest rate hike failed to impact its trajectory.

The yen’s decline may lead to increased living costs for Japanese households due to higher import prices. If verbal warnings do not halt the yen’s slide, direct intervention in the currency market may be considered.

The interest rate differentials between Japan and other developed economies, particularly the US, are expected to remain wide, contributing to the yen’s weakness, the report added.

Hedge funds and asset managers have increased bearish positions on the yen. The BOJ’s board member emphasised the importance of managing monetary policy for a gradual normalisation without aggressive rate hikes.