Yen weakens again past ¥160 per dollar, bank forecasts move toward ¥164
The Japanese yen weakened again past ¥160 per dollar during trading in the United States, for the first time in nearly a month. Sumitomo Mitsui Banking suggested that without factors to halt the currency’s weakening, the dollar rate could approach the pre-intervention high just below ¥164. The Japan Times reports.
On Monday afternoon, the yen traded at around ¥159.8 per dollar. Meanwhile, the yield on 10-year Japanese government bonds briefly reached 2.95%, a new 30-year high. The Nikkei 225 index fell sharply in the morning but recovered in the second half of the day.
Risk of losing the intervention’s effect
At the end of July, Japan and the United States carried out a coordinated currency intervention to support the yen. Japan alone spent approximately $100 billion on the operation. After that, the exchange rate moved from about ¥163.9 per dollar to around ¥155, but the currency lost a significant part of this strengthening within a month.
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Sumitomo Mitsui Banking noted that before the rate approaches ¥164, Japanese Finance Minister Satsuki Katayama or U.S. Treasury Secretary Scott Bessent could resort to verbal warnings to slow the yen’s weakening or reverse its direction.
G20 meetings and rate expectations
Heads of finance ministries and central banks of the G20 countries met in North Carolina. According to Reuters, Bessent was expected to meet with Bank of Japan Governor Kazuo Ueda during the event. The day before, Bessent told Reuters that yen fluctuations were under control and said he would not pressure Japan’s central bank to raise rates to support the currency.
The yen crossed the ¥160 level on Friday after remarks by U.S. Federal Reserve Chair Kevin Warsh at the Jackson Hole symposium. He said the Fed was monitoring inflation and would act if indicators did not move in the desired direction. Totan ICAP data as of Friday indicated that the market put the probability of a Bank of Japan rate hike in September at 85%.
