Yen Rebounds After Hitting 34-Year Low of 160 to Dollar in Thin Trade — Update

By Kosaku Narioka

The Japanese yen strengthened sharply in afternoon trading in Asia, bouncing after it briefly hit a new 34-year low of 160 against the dollar on waning expectations for near-term rate increases from the Bank of Japan.

The yen rebounded to 155.07 to the dollar Monday afternoon after earlier touching its weakest level since April 1990. Trading volumes were thin as it was a public holiday in Japan. The yen was 158.34 to the dollar late Friday in New York.

Market expectations for yen-buying intervention by Japanese authorities have been running high following the Japanese currency’s sharp depreciation recently.

The yen fell sharply Friday after the Bank of Japan left its interest-rate target unchanged–a month after it raised rates for the first time in 17 years–and Gov. Kazuo Ueda disappointed traders who were looking for hints about further rate increases.

Ueda left the door open for more rate increases but suggested that recent falls in the yen–which would increase the prices of imported goods–might not trigger immediate BOJ action. Currency weakness “hasn’t had a major impact on underlying inflation,” he said.

Following the apparent lack of intervention by Japanese authorities on Friday, despite the yen’s sharp depreciation, “the market appears to be losing its fear of intervention,” said Alvin T. Tan, head of Asia FX strategy at RBC Capital Markets.

He said a lack of liquidity on a Japanese holiday had exacerbated the yen’s drop earlier Monday morning.

The dollar has strengthened in recent weeks as signs of strong U.S. inflation eroded hopes for a near-term rate cut by the Federal Reserve. The U.S. central bank’s two-day policy meeting is scheduled to start Tuesday.

Some analysts have said that even if Japanese authorities intervene to support the yen, the effect could be limited, as the primary driver of the dollar/yen pair is the interest rate differential between the U.S. and Japan.

–Ronnie Harui contributed to this article.

Write to Kosaku Narioka at kosaku.narioka@wsj.com

(END) Dow Jones Newswires

04-29-24 0130ET