The Japanese yen weakened in Asian markets on Wednesday against a basket of major and minor currencies, deepening its losses for the third consecutive day against the US dollar, reaching the 160 yen mark. This puts investors on high alert for the possibility of intervention by Japanese monetary authorities to support the local currency and limit excessive movements in the foreign exchange market.
The US dollar held onto its gains against a basket of global currencies, as markets assessed the latest developments in negotiations between Washington and Tehran, following confirmation from both sides that diplomatic contacts were continuing and that the terms of the final agreement were being discussed.
Price overview
The dollar rose against the yen by about 0.1% to 160.00 yen, its highest level since April 30, from today's opening price of 159.91 yen, and recorded a low of 159.82 yen.
The yen ended Tuesday's trading down about 0.2% against the dollar, its second consecutive daily loss, due to escalating tensions between the United States and Iran over the Strait of Hormuz.
160 yen barrier
Japanese authorities are closely monitoring the movements of the local currency in the foreign exchange market, especially as the yen has fallen to the pivotal barrier of 160 yen to the dollar, a level seen as a threshold that could prompt authorities to intervene again in the market.
Sources told Reuters that Tokyo intervened several times in late April and early May to halt the yen's decline, but the currency's strength proved short-lived. Its exchange rate at that time was 159.25 yen to the US dollar, its weakest level since April 30.
Japanese Finance Minister Satsuki Katayama said on Tuesday that authorities are ready to intervene in the currency market if needed, and declined to comment on recent movements in the yen's exchange rate.
Opinions and analyses
Hirofumi Suzuki, chief foreign exchange strategist at Sumitomo Mitsui Bank, said that upward pressure on crude oil prices makes it easier for selling pressure on the Japanese yen to grow.
Suzuki added: “I believe the red line that might prompt Japanese authorities to intervene is not a precisely defined level, but the area between 160 and 161 yen to the dollar is likely to be closely watched.”
The Bank of Japan will meet on June 15 and 16 to consider monetary policy tools appropriate to developments in the world's fourth-largest economy.
The pricing of the probability of the Bank of Japan raising interest rates by 0.25 percentage points at its next June meeting is currently settling at around 60%.
Markets are eagerly awaiting a speech by Bank of Japan Governor Kazuo Ueda later today, as it may provide clues as to whether the central bank will proceed with raising interest rates in June.
US dollar
The dollar index rose by about 0.1% on Wednesday, maintaining its gains for the third consecutive session, reflecting the continued rise of the US currency against a basket of global currencies.
This rise comes amid a state of caution prevailing in the markets, with investors shunning risk while awaiting the outcome of the ongoing negotiations between the United States and Iran regarding ending the war and reopening the Strait of Hormuz.
Updates on US-Iranian negotiations
US President Donald Trump stated that he believes a framework agreement with Iran will be reached within the next week to extend the ceasefire.
Iran confirmed that it is still studying the draft of the final proposal for the agreement and has not yet sent its official response to the United States.
US Secretary of State Marco Rubio announced that Iran has agreed to discuss aspects of its nuclear program that it had previously refused to discuss.
The American side insists that no sanctions relief will be offered in exchange for reopening the Strait of Hormuz alone, linking this to key issues, foremost among them the Iranian nuclear program.
