The latest leg of the yen’s decline followed comments from Finance Minister Satsuki Katayama, who said foreign-exchange issues were not on the agenda in a meeting with Bank of Japan Governor Kazuo Ueda. The absence of any sign of imminent support for the currency deepened selling pressure, sending the yen down to 157.48 per dollar in Asian trading.
Investors have pushed the Japanese currency roughly 6% lower since Prime Minister Sanae Takaichi took office, amid concerns over the scale of borrowing required for her planned stimulus programs. This comes despite rising Japanese government bond yields that would typically lend the yen some support.
“You must either believe that there’s a ‘Sell Japan’ narrative going on, or you take the view that these relationships are no longer stable,” said Vishnu Varathan, head of research for Asia at Mizuho, referring to the yen’s slide even as the U.S.–Japan rate gap narrows.
With the currency now back near its January levels, traders increasingly expect that Tokyo could intervene around the psychologically important 160 mark—especially in the event of steeper moves. Chief Cabinet Secretary Minoru Kihara said Thursday that recent swings were “sharp, one-sided and concerning.”
Moves extended beyond Japan as the euro, pound, New Zealand dollar and Australian dollar all retreated against the greenback. Minutes from the Federal Reserve’s October meeting suggested a December rate cut is less likely, noting that “many” officials opposed a 2024 move while “several” still saw one as possible.
“In Fedspeak, ‘many’ means more than ‘several,’ so I think there’s a bit of a hawkish message that’s supporting the dollar,” said Moh Siong Sim, strategist at Bank of Singapore.
The euro and sterling each touched two-week lows at $1.1510 and $1.3040, respectively. The New Zealand dollar, having dropped 1% on Wednesday to a seven-month low of $0.5591 amid expectations of an imminent local rate cut, steadied to $0.5611.
Markets now fully price in a rate cut in New Zealand next week, while odds of a December U.S. rate cut have sunk below 25%—a dramatic shift from near-certainty just a month earlier.
Buoyed by shifting policy expectations, the dollar index rose 0.5% overnight, breaking above its 200-day moving average before adding another 0.15% to reach 100.25.