Yen in Freefall to 38-Year Low

London: 2 July 2024 (TraderMade): The Japanese Yen (JPY) is experiencing a dramatic decline, reaching a staggering 38-year low against the US Dollar (USD) on Monday. This sharp drop has financial experts scrambling for answers and raising concerns about potential intervention from Japanese authorities.

The USDJPY pair surged 0.49% over the last few days to 161.61151.

Widening Interest Rate Gap Fuels Dollar Strength

Analysts attribute the Yen's weakness to the widening gap between US and Japanese interest rates.

The Federal Reserve's hawkish stance on inflation has led to rising US yields, making the Dollar a more attractive investment compared to the Yen, which remains under the control of the Bank of Japan's ultra-loose monetary policy.

Japan Signals Intervention on the Horizon

While the government hints at intervention to curb the decline, its effectiveness still must be determined. The weaker Yen could have mixed effects, making imports pricier but boosting exports, leaving the Bank of Japan with a tough choice between growth and inflation control.