Yen Weakens Again as Intervention Effect Fades
The Japanese yen weakened past the 159-per-US-dollar mark during Tuesday's trading (August 11). This decline erased roughly half of the gains the yen had secured following major intervention by Japan and the United States in late July.
That intervention had been triggered when the yen plunged to a roughly 40-year low. However, market sentiment has soured due to the lack of sufficiently strong follow-up measures to sustain the Japanese currency's appreciation.
Fundamental factors continue to exert pressure on the yen. The interest rate gap between Japan and the United States remains wide, while concerns regarding Japan's fiscal health compounded by high energy and import costs weigh heavily on the currency.
High oil prices pose an additional challenge for Japan, given the country's heavy reliance on energy imports. A weak yen drives up import costs and threatens to intensify domestic inflationary pressures.
The Bank of Japan has also begun to signal concern over inflation. In the summary of opinions from the July meeting, one member even raised the possibility of accelerating the pace of interest rate hikes should price pressures continue to mount.
Newsmaker Analysis: The 159–160 range against the dollar represents a critical level for the yen. Further depreciation could fuel speculation regarding fresh intervention from Tokyo or support from Washington. However, without a narrowing of the US-Japan interest rate gap, any strengthening of the yen may struggle to hold its ground in the long term. (asd)
Source: Newsmaker.id
