Title: USD/JPY Soars to 152.50 Amid Unyielding Yen Weakness
Author: InvestingLive News Team
Original Source: [InvestingLive.com](https://investinglive.com/news/usdjpy-hits-15250-relentless-yen-selling-20251008/)
The Japanese yen continues to weaken considerably, pushing the USD/JPY exchange rate to a new 34-year high of 152.50. This milestone underscores persistent selling pressure on the yen, driven by a combination of stark policy divergence between the Federal Reserve and the Bank of Japan, compounded by geopolitical and economic uncertainties.
The yen’s sharp depreciation reflects heightened investor confidence in the U.S. dollar and long-standing expectations that Japanese interest rates will remain low. As traders reacted to these dynamics, the currency pair broke through the previous intervention level, raising market speculation about potential action from Japanese authorities.
Key Developments Highlighting the Yen’s Weakness:
– USD/JPY touched 152.50 on Monday, the highest level since 1990.
– Investors increasingly speculated the Japanese government and Bank of Japan (BOJ) might intervene to stabilize the currency.
– Despite earlier signals of potential action, the Ministry of Finance (MOF) remained silent after the pair crossed the 152 threshold again.
– The U.S. dollar remained firm across the board, supported by strong U.S. economic data and a hawkish Federal Reserve outlook.
Currency traders have remained cautious but have steadily renewed bets against the yen amid limited response from Japanese authorities. This has emboldened speculation that the existing tolerance for yen depreciation may now be wider than previously thought.
Underlying Factors Contributing to the Yen’s Slide
Several core issues are contributing to the relentless downward pressure on the Japanese currency:
1. Diverging Monetary Policy Outlooks:
– The U.S. Federal Reserve maintains a hawkish stance, keeping interest rates elevated to combat inflation.
– Conversely, the BOJ has been slow in abandoning its ultra-loose monetary policy. Despite some minor shifts, real interest rates in Japan remain negative.
– Higher yields in the U.S. attract capital inflows, while Japan’s stagnant rates continue to dissuade investment in the yen.
2. Interest Rate Differentials:
– The U.S. 10-year Treasury yield hovers near 4.8 percent, compared to Japan’s 10-year bond yield of approximately 0.75 percent.
– The yield differential heavily favors the U.S. dollar in carry trades, where investors borrow yen at low interest rates and invest in higher-yielding assets elsewhere.
3. Domestic Challenges in Japan:
– Japan’s inflation rate, while elevated compared to previous decades, remains modest and has not prompted a significant tightening response.
– Wage growth has been minimal despite rising living costs, limiting the Bank of Japan’s ability to normalize inflation expectations.
– The Japanese economy continues to show sluggish growth, further reinforcing the BOJ’s dovish positioning.
4. Global Risk Sentiment:
– As geopolitical tensions persist in several regions, including the Middle East and Europe, investors favor safe-haven assets like the U.S. dollar.
– The yen, traditionally seen as a safe haven, has ironically lost that status amid Japan’s accommodative monetary environment.
Traders Brace for Possible Intervention
While the MOF and BOJ refrained from immediate intervention, many market participants remain on high alert for signals that might indicate forthcoming action from Tokyo. This stems from the historical precedent set on October 21, 2022, when Japan conducted a massive currency intervention after USD/JPY breached the 152.00 mark, pulling the rate down by several yen in a short period.
However, analysts point out that the absence of clear pushback from officials this time may suggest a shift in tolerance for yen weakness. Investors who once feared sudden intervention have become emboldened, viewing the yen’s descent as a controllable risk.
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