Investing.com– The Japanese yen came close to its weakest level in nearly 40 years on Tuesday as the dollar continued its Monday’s gains, sparking renewed market chatter over a likely government intervention to support the beleaguered currency.
The yen’s pair– which gauges the number of yen required to buy one dollar– steadied at 161.58 yen on Tuesday. It was now within spitting distance of its 2024 high of 161.96 yen, with any level above that– around 162 yen– putting the pair at levels last seen in 1986.
The currency, which has lost about 3% so far this year, remained under pressure from a wide rift between U.S. and Japanese interest rates, even as the Bank of Japan hiked rates by 25 basis points last week.
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Growing uncertainty over fiscal spending also weighed, with Japanese government bond yields remaining close to multi-decade highs amid bets on more stimulus measures and tax cuts from Tokyo.
Prolonged weakness in the yen kept markets largely focused on more intervention in foreign exchange markets by the government.
Japanese Finance Minister Satsuki Katayama held an online meeting with U.S. Treasury Secretary Scott Bessent late on Monday, according to a report from Reuters. The meeting focused on policy responses to the historically weak yen, potentially including currency intervention.
Tokyo had spent a record 11.7 trillion yen ($72.4 billion) intervening in currency markets in late-April and early-May. The move had provided only limited support to the yen, with the currency moving back towards 40-year lows over the past month.
Japanese officials have repeatedly warned of more intervention if the yen keeps weakening.
Jaiveer Shekhawat contributed reporting.
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