Dollar steady, Yen weakens

24 Jun 2024 , 10:36 AM

On Monday, the dollar remained largely steady. Meanwhile, the Japanese yen hovered near the 160 level, prompting verbal warnings from Japanese authorities over concerns of market intervention.

The yen weakened to 159.94 per dollar in early trading, its lowest since April 29, when it hit a 34-year low of 160.245. Japanese authorities responded by spending approximately 9.8 trillion yen to support the currency.

By the latest updates, the yen strengthened slightly to 159.70 per dollar. Japan’s top currency diplomat, Masato Kanda, assured on Monday that authorities would take necessary actions if there were excessive fluctuations in foreign exchange rates. He also clarified that Japan’s inclusion on the U.S. Treasury’s monitoring list would not restrict their responses.

The yen faced renewed pressure following the Bank of Japan’s decision earlier this month to postpone reducing its bond-buying stimulus until the July meeting. This decision contributed to a 1.4% decline in the yen’s value in June.

According to a summary of opinions from the BOJ’s June policy meeting released on Monday, some policymakers advocated for timely interest rate hikes due to concerns about inflation exceeding expectations.

The yen’s depreciation against the dollar by over 10% this year is primarily driven by the substantial interest rate differential between Japan and the United States. This gap has spurred demand for carry trades, where investors borrow yen at low rates to invest in higher-yielding currencies. As a result, both the Australian and New Zealand dollars have surged to their highest levels against the yen in 17 years.