The Japanese yen fell in Asian trading on Tuesday against a basket of major and minor currencies, resuming losses that had briefly paused yesterday against the US dollar, and moving back toward its lowest levels in 20 months, under the watch of Japanese authorities who have issued strong warnings against excessive movements in the domestic currency in the foreign exchange market.
Data showed an unexpected slowdown in core inflation in Tokyo during March, in the latest sign of easing inflationary pressures on policymakers at the Bank of Japan, which has led to a decline in expectations for a Japanese interest rate hike in April.
Price Overview
Japanese yen exchange rate today: the US dollar rose 0.2% against the yen to 159.97, up from the session opening level of 159.67, after hitting a low of 159.59.
The yen ended Mondays session up 0.35% against the dollar, marking its first gain in the past five days, after earlier hitting a 20-month low of 160.46.
Monthly performance
Over the course of March trading, which officially ends with todays settlement, the Japanese yen has declined about 2.5% against the US dollar so far, heading for a second consecutive monthly loss and its largest monthly decline since last October.
This monthly loss is attributed to investors focusing on buying the US dollar as a preferred safe-haven asset amid concerns related to the impact of the Iran war.
Japanese authorities
In the strongest warning yet of potential intervention to support the yen, Japans top currency official Atsuki Mimura said on Monday that authorities may need to take decisive action if speculation in currency markets continues.
Mimura told reporters: we are hearing that speculation is increasing in currency markets, in addition to crude oil futures markets. If this situation continues, it may be time to take decisive action.
The 160 yen threshold
The US dollar rose against the yen on Friday, reaching 160 for the first time since July 2024, when Japanese authorities last intervened to support the currency.
Authorities in Tokyo have repeatedly warned of possible intervention to support the yen if its value declines excessively. The most recent intervention took place in July 2024, when the exchange rate reached around 161 per dollar, its lowest level since the 1980s.
Tokyo core inflation
Data released today in Japan showed that Tokyo core consumer prices rose 1.7% in March, below market expectations of a 1.8% increase, after rising 1.8% in February.
Lower-than-expected price readings in Japan signal easing inflationary pressures on policymakers at the central bank, reducing the likelihood of interest rate increases this year.
Japanese interest rates
Following the data, markets reduced pricing for the probability of a quarter-point rate hike by the Bank of Japan at the April meeting from 25% to 15%.
To reassess these expectations, investors are awaiting further data on inflation, unemployment, and wages in Japan.