Japan's Finance Minister Katsunobu Kato has issued a fresh warning regarding speculative yen selling. Recently, the yen approached the critical 160 per dollar level. This milestone prompted government interventions six months ago to support the currency.
Minister Kato emphasized the government's concern over the currency's one-sided and sharp movements. He reiterated that speculative activities were being closely monitored. Additionally, the Japanese government is prepared to act against excessive fluctuations in the foreign exchange market.
The dollar strengthened to 158.33 yen on Tuesday, the highest since July 17. This movement was supported by rising U.S. Treasury yields. In July, Japan intervened to prevent the yen from falling below 161 per dollar, a 38-year low.
Growing interest rate differentials between the U.S. and Japan have also weighed heavily on the yen. The Federal Reserve’s higher interest rates are widening the gap. Meanwhile, Japan's monetary policy remains accommodative, creating additional pressure on its currency.
Economists remain cautious about the yen's future. Mizuho Securities' chief market economist, Yasunari Ueno, noted limited potential for the yen to strengthen against the dollar. He highlighted the minimal likelihood of U.S.-Japan interest rate differentials narrowing in the near term.
Uncertainty surrounding U.S. policies further complicates the outlook. For instance, President Trump's statements about tariffs caused fluctuations in market sentiment. However, the dollar regained strength after clarifications on his trade policies.
Given the current trajectory, Japan's government might consider another intervention. Finance Minister Kato has made it clear that excessive moves will prompt action. Traders are advised to stay cautious as speculative activities could trigger sudden market changes.
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