Yen plummets to 34-year low below 160 against dollar: Report

The Japanese yen plunged to its lowest level in 34 years, slipping below 160 against the US dollar on Monday.

According to news agency AFP, this fall came after an unusually high US inflation report, which dashed hopes for possible interest rate cuts by the Federal Reserve this year.

Add WION as a Preferred Source

Trading at 160.17 in morning sessions, the yen hit its weakest point since 1990, igniting speculation about potential intervention by Japanese authorities to strengthen their currency.

This would mark the first intervention since 2022, weighing growing concerns over the yen's rapid decline.

Last week, the Bank of Japan (BoJ) opted against further tightening of monetary policy, a decision that surprised spectators while pressures on the yen continued to mount.

Despite assurances from Japanese officials about readiness to intervene in volatile exchange rate movements, doubts lingered about the effectiveness of such measures.

"Expectations of intervention having a sustained impact may disappoint given macro fundamentals do not support a sudden shift to a hawkish monetary stance," AFP quoted Tapas Strickland from National Australia Bank as saying.

The US Personal Consumption Expenditures (PCE) index posted a strong increase, marking the third consecutive surge in the consumer price index.

This, along with warnings from US Federal Reserve members warning against premature rate cuts, prompted investors to rethink their expectations.

Initial projections of up to six rate cuts in 2024 were slashed, with the consensus settling on just one reduction.

Market analysts eagerly anticipate the Federal Reserve's upcoming policy announcement, seeking fresh insights into the central bank's stance on monetary policy.

Meanwhile, the Bank of Japan is trying to facilitate supportive financial conditions with its decision to maintain its benchmark rate between zero and 0.1 per cent.

The BoJ's departure from negative rates last month with its first rate hike in 17 years, marked a major shift in Japanese monetary policy.

After struggling for decades with deflation and economic stagnation, Japan's inflation finally stabilised around two per cent.

Despite the BoJ's unique stance, it faces mounting pressure in the middle of the global trend of central banks raising rates to combat rising inflation.

This divergence in monetary policies has contributed to investors flocking to other currencies, worsening the yen's downward spiral.

"We still think we are quite close to the Finance Ministry's intervention, in light of the recent rhetoric on excessive currency market moves," AFP quoted Homin Lee of Lombard Odier as saying.

(With inputs from AFP)