Yen Falls to 157.48 as Intervention Risk Looms
The Japanese yen slipped 0.38% to 157.48 against the dollar. Market nerves rise over potential Tokyo intervention during holiday liquidity gaps.
Key points
- The yen weakened 0.38% to 157.48 per dollar, marking its fifth decline in six sessions.
- The Bank of Japan raised rates to 1.25%, its highest level in 31 years, on Friday.
- The dollar index rose 0.13% to 100.40 as traders priced in a higher chance of Fed hikes.
The Japanese yen fell 0.38% to 157.48 per dollar on Monday. This move marked the currency's fifth decline in six trading sessions.
Investors remain wary of potential official intervention while Japanese markets are closed. Lower liquidity during the three-day holiday increases the risk of outsized price moves.
Rate hike fails to boost currency
The Bank of Japan raised rates to 1.25% on Friday. This is the highest level in 31 years, yet the currency still weakened.
Two dissenting votes and vague guidance discouraged buyers of the yen. Reports of rate checks by officials heightened fears of imminent action.
Marc Chandler of Bannockburn Capital Markets noted that intervention at current levels is unlikely. However, the market remains nervous after the recent rise to the mid-158 range.
Dollar strength driven by Fed outlook
The dollar index rose 0.13% to 100.40 on Monday. This follows a 1.1% gain last week, the largest weekly increase since June.
Traders now price a 55.4% chance of a Federal Reserve hike. This probability rose from 43.5% a week earlier according to CME data.
Fed officials suggest strong demand is driving inflation beyond energy shocks. This view supports the expectation of further tightening in the US.
Euro and sterling face political pressure
The euro dropped 0.14% to $1.1467 after German election results. Chancellor Friedrich Merz's party suffered its worst regional defeat in postwar history.
