Key Takeaways

  • The Japanese government is under close observation for any signs of intervention
  • Yen takes its place as the worst-performing currency of 2023 with a 13% drop

Yen Troubles

The Japanese yen has reached fresh lows against the US dollar, scoring ¥150.70 against the greenback Thursday morning. Rising US Treasury yields pushed the buck higher against a basket of currencies, much to the yen’s demise. The slide marks the lowest the yen has traded against the dollar since October 2022, when it hit a 32-year low. 

The Japanese government sprung into action at that ¥150 mark last year, injecting $42.8 billion to prop up its own currency. The threshold has since been widely viewed as a critical point for the yen, as the Tokyo authorities have suggested that they might need to step in again to bolster the currency should it continue to depreciate. Naturally, as a result, the market is now closely monitoring the Asian currency as renewed intervention fears grow. 

Finance Minister Shunichi Suzuki told reporters on Wednesday that he is “watching market moves with a sense of urgency, as before”, refusing to comment further on any government interference. 

The weakness of the currency puts pressure on the Bank of Japan and its dovish stance on interest rates, with their short-term rates standing at -0.1%. The next time the central bank will make a statement on the monetary policy is slated for October 31st.

Regarded as a “safe haven”, the yen typically strengthens during periods of uncertainty. With rising US treasury yields and the dominance of the dollar, the yen is taking a back seat.

Fresh Inflation Data

Stateside, the US Gross Domestic Product (GDP) report is due to be announced today. The print measures the sum of goods and services produced in the US in each given quarter. Analysts are expecting to see a 4.7% gain in annual growth. 

Looking ahead, attention will shift to the upcoming Personal Consumption Expenditure (PCE) and Core PCE reports, the Federal Reserve’s favorite measure of inflation, due on Friday.

Taking all of these factors into account, traders should be on high alert for any potential signs of government intervention. If the yen continues its descent and Japanese officials intervene to provide support, the effects might be felt all across the forex market.