Japanese yen slides to 40-year low against the US dollar

The Japanese yen fell to a fresh 40-year low against the US dollar on Monday, while the greenback eased slightly from a 13-month high ahead of the closely watched US jobs data.

The yen weakened to 162.41 per dollar, its lowest level since 1986.

The Japanese currency is on track to decline 2% in the second quarter, marking its fourth consecutive quarterly loss. This is its longest losing streak since 2022, when it fell for seven straight quarters, according to Reuters.

Meanwhile, the US dollar index, which measures the greenback against a basket of six major currencies, recovered some of its overnight losses to trade at 101.28. The index is set to gain 1.4% in the second quarter after rising 1.6% in the first quarter.

The yen’s sharp decline has fuelled speculation that Japanese authorities may intervene in the currency market. However, Japanese Finance Minister Satsuki Katayama reiterated that the government stands ready to respond appropriately whenever necessary, without signalling any immediate action.

The yen has remained under pressure despite currency market interventions worth 11.7 trillion yen ($72.25 billion) and interest rate hikes by the Bank of Japan in recent months. Concerns over inflation triggered by the US-Iran war and uncertainty over the global interest rate outlook have continued to weigh on the currency.

Speculators have also increased bearish bets on the yen. The latest weekly data from a US regulator showed net short positions worth $11.3 billion, close to their highest level in two years, Reuters reported.

Investor now await Thursday’s US non-farm payrolls report for June which is likely to influence the outlook for the US Federal Reserve interest rates. Traders are currently pricing in a 63% probability of a Fed rate hike by September.

Data also showed that investors have built their largest-ever net long positions on the US dollar during the first half of the year, reflecting strong expectations that the greenback will continue to outperform other major currencies, Reuters reported.

Other currencies

The euro fell 0.18% to $1.1403, remaining close to the one-year low touched last week. The British pound slipped 0.17% to $1.3237.

The Australian dollar declined 0.27% to a three-month low of $0.6867, while the New Zealand dollar traded at $0.5644.

(With inputs from Reuters)