The yen hit a fresh 39-year low past 162 versus the U.S. dollar on Tuesday, despite concerns by market players of possible intervention by Japanese authorities to stem the currency's fall.
The Japanese currency sank to the lower 162 zone in Tokyo, marking its lowest level since December 1986, amid expectations of Federal Reserve interest rate hikes this year. Yen selling was also accelerated at one point by domestic importers who bought the dollar.
"There is a growing view that it will be difficult for the yen to compete with the dollar if the Fed does go ahead with rate hikes," said Takuya Kanda, senior researcher at the Gaitame.com Research.
Although Japanese Finance Minister Satsuki Katayama warned earlier in the day that the government is "always" ready to act when necessary, in response to the yen's fall against the dollar, the currency market showed little reaction.
According to Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management Co, the yen is already at a level where intervention would not be surprising.
He said, "If the yen's decline accelerates from here, the likelihood of intervention will increase significantly."
Tokyo stocks ended higher, with the benchmark Nikkei briefly gaining nearly 1,200 points, as investors were prompted to buy chip and artificial intelligence-related shares after South Korea's tech giants Samsung Electronics Co and SK Hynix Inc said the previous day that they will invest a total of about 4,755 trillion won as part of the government's plan, brokers said.
The market was also supported by overnight Wall Street gains amid easing concern over the Middle East conflict after reports that the United States and Iran had agreed to halt attacks against each other.
However, the market briefly slipped into negative territory as overheating concerns persisted. Fears that a weaker yen would lift import costs and weigh on earnings also pressured the market, the brokers said. A weaker yen increases overseas profits when repatriated.
The 225-issue Nikkei Stock Average advanced 594.21 points, or 0.86 percent, from Monday to 70,062.32. The broader Topix index finished 12.76 points, or 0.32 percent, higher at 3,994.76.
On the top-tier Prime Market, the main gainers were nonferrous metal, electric appliance and metal product issues.
© KYODO
10 Comments
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3RENSHO
"Do not attempt to catch a falling knife"...
dmhondz
With this rate, I don’t see how Japan can continue to attract needed foreign workers for their farms, construction, manufacturing and healthcare sectors. Many are restricted from bringing their families here and with the Yen sinking in value once sent back to their home countries on top of being paid with minimum wage, it’s a disadvantage for many in the labor sector. Language barrier and anti-immigration sentiment, what reason would a foreign worker want to come or stay for longer?
Lifer
Thank you so much,LDP.
With our investments overseas,us foreign residents can bring in so much more wealth.
Whilst your own populace dive deeper into penury.
Spitfire
Good points.
Cakewalk JP
Feel sorry for Japanese folks who are finding overseas travel and study increasingly too expensive but it will help boost tourism in Japan.
kohakuebisu
It's driving up the price of everything, including very proleterian things like cheap imported chicken meat, the soybeans used to make tofu, or the wheat used to make bread and udon. This affects people with no interest in overseas.
The government has massive overseas holdings, so it makes bank on this. Japan's net debt will go down as a result.
nero
And on top of that early eject from world cup. Lol, anyway feels good to be earning dollars here. Carry on.
GillislowTier
Something drastic needs to be done and its still not happening. It feels like Japan is waiting for the rest of the world to play nice and go back to what it was pre-covid. They are going to keep having to intervene on their currency and pay for utility subsedies constantly, not just in summer or winter at this rate. The average person and family won't be able to sustain the low income coupled with price increses based on the what is now minority of citizens that are getting salary hikes each year.
Spitfire
But don’t worry folks the bill on the desecration of the flag passed in the Diet today.
Glad Sanae and co put the people’s needs first.
Chabbawanga
What are the options?
1) intervene and burn money
2) raise rates to competitive level with US and crush domestic mortgage holders and SMEs
3) do nothing, exporters make bank, public suffers from more and more inflation