The Japanese yen remained under heavy pressure on Wednesday, trading near its weakest level in almost four decades as rising crude oil prices and higher US Treasury yields strengthened the US dollar.
The sharp decline has increased concerns that Japanese authorities may intervene again to support the currency.
The yen touched 163.24 per dollar during New York trading on Tuesday, its lowest level since late 1986. It continued to trade near those levels in Asian markets, hovering around 163.21 per dollar.
The dollar gained against major currencies as investors sought safety amid escalating tensions in the Middle East. US military operations against Iran entered another phase, boosting demand for the dollar as a safe-haven asset.
Brent crude futures climbed to a six-week high of $91.99 per barrel, while US Treasury yields also moved higher.
The 30-year Treasury yield rose to a two-month peak of 5.15%, while the benchmark 10-year yield touched 4.64%, increasing pressure on the yen.
Higher US yields typically strengthen the dollar by attracting investors towards American assets.
A rise in long-term yields above key levels also tends to affect global markets by increasing borrowing costs and reducing demand for riskier assets.
The yen’s weakness has been driven by Japan’s prolonged low interest rates and concerns over the country’s fiscal position.
Japan previously carried out record currency intervention in April and May after the dollar-yen exchange rate crossed the 160 mark.
However, the impact of those measures has faded, with Japanese officials now relying more on the threat of intervention to discourage excessive currency moves.
HSBC analysts said Japan could intervene again soon, but warned that intervention alone may not create a lasting reversal unless supported by stronger Bank of Japan rate hikes, a shift towards US rate cuts or improved confidence in Japan’s fiscal outlook.
Analysts expect the dollar-yen pair to remain within a higher trading range of 160-165, with periodic intervention limiting further gains while Japan’s low real interest rates continue to weigh on the currency.
