The Japanese yen slid to its weakest level in nearly four decades on Wednesday as a sharp rise in US Treasury yields lifted the dollar and reinforced expectations of a more hawkish Federal Reserve, Reuters reported.
In early Asian trade, the dollar climbed to 162.77 yen, its highest since 1986, moving further into territory that previously triggered concerns over potential currency intervention by Japanese authorities.
Market participants are now watching closely for any signs of action from Tokyo, with some analysts suggesting intervention risks are rising as the yen approaches levels seen as politically sensitive.
Wells Fargo Head of Macro Strategy for APAC Chidu Narayanan said markets are nearing thresholds that could prompt policy action.
“We believe we are close to potential action,” said Chidu Narayanan, head of macro strategy for APAC at Wells Fargo, referring to the likelihood of another intervention.
“We are at crucial levels, not necessarily in terms of a target spot level, but levels where the (Ministry of Finance) might need to intervene to retain its credibility.”
Traders also pointed to the upcoming US public holiday on Friday as a possible window for intervention, given thinner liquidity conditions that could amplify market moves.
The broader dollar index remained firm after an overnight jump in US Treasury yields, which continued to underpin demand for the greenback. The move came after a notable rise in both 10-year and 2-year yields in the previous session.
Elsewhere in currencies, the euro slipped 0.07% to US$1.1413 while sterling eased 0.09% to US$1.3252. The Australian dollar fell 0.18% to US$0.6907 and the New Zealand dollar edged 0.04% lower to US$0.5674.
Attention now turns to upcoming US nonfarm payrolls data, which is expected to provide further direction for interest rate expectations. Traders are currently pricing in a higher probability of a Federal Reserve rate hike later this year as inflation and labour market resilience keep policy expectations elevated.
