The yen weakened rapidly in the foreign exchange market, temporarily reaching the ¥158-per-dollar level. The Bank of Japan's rate check heightened concerns about intervention but failed to halt the yen's downtrend.
The yen weakened rapidly in the foreign exchange market, temporarily falling to the low ¥158-per-dollar range. Market participants believe yen-selling prevailed against the backdrop of U.S. interest-rate trends and the divergence between Japanese and U.S. monetary policy.
In the United States, recent economic data exceeded market expectations, broadening the view that the Federal Reserve could implement an additional rate hike during the year and strengthening demand for the dollar. This led to continued periods of accelerated yen selling.
On the Japanese side, the Bank of Japan announced its decision to raise the policy rate to around 1.25%, but the fact that 2 policy board members voted against the move conveyed the appearance of internal divisions to the market. The lack of guidance at the press conference on the pace of future rate hikes also failed to provide a strong catalyst for yen appreciation.
In the bond market, U.S. long-term interest rates rose to around 5.1% and Japan's 10-year government bond yield also increased to approximately 3.055%, sustaining downward pressure on the yen amid the interest-rate differential. In addition, as concerns grew over possible actual intervention by the government and the Bank of Japan, the rate check triggered a temporary reversal toward yen appreciation, but did not lead to a fundamental shift in the underlying pressure to sell the yen.