Yen weakens to 40-year low

{"text":[[{"start":9.45,"text":"The Japanese yen has fallen to its lowest level against the dollar in almost four decades as investors worry about the economic effects of the war in Iran and authorities’ struggles to tame inflation."}],[{"start":21,"text":"The yen weakened past ¥162 to the dollar for the first time since December 1986 during morning trading in Tokyo on Tuesday, leaving it down more than 3 per cent this year and fuelling speculation that Japanese authorities would intervene again to support the currency."}],[{"start":39.85,"text":"As the yen approached an intraday low of ¥162.27, Japan’s chief cabinet secretary, Minoru Kihara, used a morning press conference to repeat the government’s position that it “stands ready to take action whenever necessary”."}],[{"start":56.150000000000006,"text":"The recent weakening in the yen, which took it past its mid-2024 low, has been spurred by concerns that the Bank of Japan is at greater risk than its global peers of “falling behind the curve” at taming inflation, triggered by the burst of higher oil prices caused by the Iran war."}],[{"start":null,"text":"

"}],[{"start":72.85000000000001,"text":"Prime Minister Sanae Takaichi in late June revealed plans for a massive programme of public and private investment in economic growth. The envisaged scheme would see the equivalent of $2.3tn invested over 14 years, but the relative lack of detail about how the funding would be split revived concerns that she has set Japan on course for more fiscal expansion."}],[{"start":95.9,"text":"Crossing ¥162 provides “another reminder of how weak the yen has become”, said Lee Hardman, senior currency analyst at MUFG. “The energy price shock has weighed on the [currency], and the Fed’s hawkish policy update is now encouraging higher US rates and a stronger dollar.”"}],[{"start":114.2,"text":"However, some analysts also point to Japan’s recent stock market rally as a source of downward pressure on the yen. Since the start of the year, the Nikkei 225 index has broken a series of records, rising above 72,000 points last week in a move driven primarily by foreigners piling into AI and semiconductor names."}],[{"start":133.95,"text":"Those bets, traders said, had been accompanied by significant currency hedging, which has created selling pressure on the yen."}],[{"start":141.5,"text":"The new low will prompt speculation of further intervention from the Japanese authorities to support the yen after it spent tens of billions of dollars to shore up the currency in April and May. That came after a so-called rate check by US authorities in January."}],[{"start":156.55,"text":"“The Japanese probably realise that FX intervention at the moment is an exercise in futility,” said Chris Turner, ING’s global head of markets research."}],[{"start":166.45000000000002,"text":"“But they don’t want to leave yen losses unchecked in case it triggers a ‘sell Japan’ mindset should Japanese government bonds and then equities come under pressure, too,” added Turner, who expected further bouts of intervention."}],[{"start":178.75000000000003,"text":"Traders have attributed some of the currency’s weakness to the BoJ being slow to raise interest rates to keep up with inflation that has gradually climbed to 1.5 per cent in May."}],[{"start":189.40000000000003,"text":"The central bank in mid-June raised interest rates to “around 1 per cent”, the highest level since 1995, but only one further quarter-point rise by January is expected by traders. The US Federal Reserve, in contrast, is expected to raise rates one or two times from the current range of 3.5 per cent to 3.75 per cent."}],[{"start":211.25000000000003,"text":"“The direction of travel is pretty clear because the Bank of Japan’s monetary policy is so disconnected from what’s going on in the US and Europe — the yen is likely to remain pretty weak,” said Ed Al-Hussainy, a portfolio manager at Columbia Threadneedle."}],[{"start":225.80000000000004,"text":"The yen was suffering from the BoJ being slow to tighten policy, but also a “big change” in fiscal policy, Al-Hussainy said. “They’ve dumped a bunch of fiscal stimulus into the economy without any change in monetary policy. That risks the economy running hot.”"}],[{"start":247.95000000000005,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1782796984_8099.mp3"}