Apr 25 2024: The yen marked fresh lows against the dollar, touching levels not seen in 34 years, and hit a 16-year low against the euro on Thursday. Investors are closely watching the Bank of Japan (BOJ) policy meeting, which concludes on Friday, with expectations that the meeting may not deliver hawkish measures to bolster the Japanese currency.
In the previous session, the dollar surpassed the 155 yen threshold for the first time since 1990, maintaining its strength after trading within a narrow range for several days.
On Thursday, the dollar surged to a 34-year high of 155.74 yen before settling slightly higher at 155.62, marking a 0.2% increase. Similarly, the euro reached a 16-year peak of 166.98 yen and was up by 0.35% at 166.77.
Market observers view the breach of the 155 yen level as a potential trigger for Tokyo authorities to intervene. There is keen anticipation for signs of intervention, as a lack thereof could attract speculative flows and push the yen further, possibly reaching 160 yen, even with intervention measures.
BOJ Governor Kazuo Ueda is expected to exercise caution, considering past instances where dovish remarks led to significant declines in the yen, necessitating intervention to stabilize the currency.
However, amid expectations of prolonged low interest rates in Japan and delayed rate cuts in the U.S., the yen continues to face downward pressure. Analysts anticipate a moderately hawkish stance from the BOJ meeting outcome. They acknowledge the challenge of substantial yen appreciation given the gradual tightening of policies and expectations of low terminal rates.
In other market movements, the dollar saw minor setbacks against other currencies following positive business activity data from Europe and the UK, which bolstered the euro and sterling.
Investor attention is now on key U.S. economic data, including the first-quarter core gross domestic product (GDP) price deflator. This data could offer insights into the upcoming release of the Personal Consumption Expenditure (PCE) price index, the Federal Reserve’s preferred inflation gauge.
Trading activity in Asia was subdued due to a holiday in Australian markets. The Australian dollar gained ground, supported by reduced expectations of rate cuts from the Reserve Bank of Australia (RBA) following encouraging consumer price inflation figures in the first quarter. Similarly, the New Zealand dollar strengthened against the dollar.
