The Japanese yen fell to a 40-year low on Tuesday, June 30, leaving authorities on high alert given this setback against the US dollar.

“Experts believe that government action will not reverse the currency’s trend,” but intervention is not ruled out, as “the ‘greenback’ is appreciating 0.1 % and is currently trading at 162.17 yen.”

In this regard, Japan’s Finance Minister, Satsuki Katayama, indicated that the government is prepared to take action. Furthermore, Chief Cabinet Secretary Minoru Kihara stated to the media that the Japanese government will work to build an economy less vulnerable to currency market volatility, while remaining prepared to intervene in the foreign exchange markets if necessary.

Analysts point out that intervention should not depend on a specific level but rather on the nature of the dollar-yen dynamic.

In any case, the overall outlook for the yen remains weak because “the wide differences in interest rates and real yields between Japan and the United States continue to favor carry trades, in which investors borrow in yen at low cost and invest in higher-yielding assets in other markets, putting downward pressure on the Japanese currency.”

M.Pino

Source: bolsamania

(Reference image source: Cullen Cedric on Unsplash)

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