Yen’s Decline Sparks Intervention Concerns; Dollar Dominates

The decline of the yen has ignited concerns about potential interventions as the dollar continues to dominate the market. The yen is nearing a critical point of 150 per dollar, following the Bank of Japan’s decision to stick with its ultra-loose monetary policy. The decision by Governor Kazuo Ueda to not shift policy has left the market on edge.

The yen hit a low of 148.49 per dollar over a ten-month period, dangerously close to the 150 mark that could prompt intervention by Japanese authorities. This comes after a dip of over 0.5% on Friday when the Bank of Japan chose to keep interest rates low. Governor Ueda emphasized the need for further data analysis before making any decisions on rate increases.

“The speed of change might be more significant than the specific level,” said Carol Kong, a currency strategist at the Commonwealth Bank of Australia. “But given recent warnings from Japanese officials, I think the risk of intervention is higher now. There’s also a higher chance of coordinated intervention, especially after recent comments from U.S. Treasury Secretary Janet Yellen, who seems to support BOJ’s intervention.”

Meanwhile, the euro saw a slight increase of 0.04% against the dollar, reaching $1.0649 after a six-month low of $1.0615 on Friday. It’s set for a monthly loss of 1.8%, it’s largest since May. The British pound stabilized at $1.2244 following a 1% drop last week when the Bank of England delayed its rate hike plans due to unexpected data showing a slowdown in Britain’s inflation rate.

“Central banks in the UK, Euro area, and Japan are shifting their approach,” noted Thierry Wizman, global FX and interest rates strategist at Macquarie. “They’re exploring whether their slowing economies will defeat inflation, or if the slowdowns are severe enough to no longer require further tightening. The U.S., however, hasn’t shown the same growth weaknesses as the rest of the world, and the Fed has indicated its willingness to take risks.”

Despite keeping rates unchanged at last week’s policy meeting, Fed officials signaled future rate hikes. The markets are currently predicting a roughly 21% chance of a 25-basis-point increase at the November meeting.

In other currency news, the Australian dollar rose slightly by 0.06% to $0.6445, while the New Zealand dollar fell 0.05% to $0.5958 after hitting a three-week high of $0.6001 earlier in the session.