The Japanese yen continued to weaken on Thursday, with the USDJPY pair reaching its highest levels in 38 years. The pair surged to 160.81 yen in morning trade, the highest since 1986, before settling around 160.56 yen later in the day. Despite warnings from Japanese officials about potential intervention in the currency market, no supportive measures were taken as the yen remained weak.
The recent weakness in the yen can be attributed to dovish signals from the Bank of Japan in June, which left traders uncertain about the central bank’s future policy tightening. Japan’s struggling economy has also raised doubts about the BOJ’s ability to raise interest rates further, despite some positive economic data such as stronger-than-expected retail sales in May.
One of the main factors putting pressure on the yen is the possibility of higher U.S. interest rates. With a significant gap between U.S. and Japanese interest rates, traders have been favoring the dollar over the yen. This trend has been exacerbated by the historic rate hike by the BOJ in March, which further widened the interest rate differential between the two countries.