Yen Nears 160 Mark Amid 7-Day Slide

The Japanese yen has set a record for its longest losing streak since March, increasing the risk of intervention by Japanese authorities.

On the morning of June 21st, the yen broke through the 159 mark against the US dollar, reaching a low of 159.13, approaching the closely watched level of 160 for the first time since April this year.

So far, the yen has fallen for seven consecutive days. Deputy Minister of Finance of Japan, Masato Kanda, reiterated that if excessive foreign exchange fluctuations are detected, appropriate action will be taken as needed.

Currently, the Federal Reserve's benchmark interest rate is at its highest level in 20 years, and the high interest rate levels have made the US dollar strengthen continuously this year.

The strength of the US dollar has put pressure on countries that import commodities priced in US dollars and those with debts. To alleviate this pressure, some countries have already begun to intervene in the foreign exchange market to increase the value of their own currencies.

In terms of the yen, affected by the interest rate gap between the United States and Japan, the yen fell below 160 against the US dollar earlier this year, reaching its lowest point in 34 years.

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To support the yen, the Japanese government has invested a record 98 trillion yen, exceeding the total intervention amount for the whole of 2022.

However, Bloomberg pointed out that Masato Kanda said in February this year that a depreciation of the yen against the US dollar by 10% within a month is considered excessive.

Currently, the maximum fluctuation of the yen against the US dollar in the past 28 days is about 5, indicating that the yen against the US dollar may need to fall to the 163 level for Japan to intervene.

In addition, it is worth noting that yesterday the US Department of the Treasury released its semi-annual currency report, pointing out that the department added Japan to the foreign exchange "monitoring list" and expressed concern about Japan's large bilateral trade surplus and current account surplus.Despite Japan's record-breaking currency intervention earlier this year to support the yen, the U.S. Treasury did not label it as a currency manipulator country. In response, on June 21, Masato Kanda stated that the U.S. exchange rate report did not view Japan's actions as problematic, and intervening in the foreign exchange market does not mean changing the underlying trend of the exchange rate. Amid the weakening yen, there has been a persistent gap between Japan's and major countries', including the U.S., government bond yields. Previously, the Bank of Japan did not announce details on reducing bond purchases at the June policy meeting. In the absence of a timetable, traders are eager to understand when the Bank of Japan will achieve normalization of monetary policy, a move that is expected to support the yen. Barclays strategists, led by Shinichiro Kadota, said in a report, "As long as the U.S.-Japan interest rate differential exceeds a certain threshold, even if the differential narrows, yen selling triggered by carry trades may not decrease." The strategists predict that by the end of this year, the U.S. dollar to yen exchange rate will be trading around 160.