Japan’s Yen sinks to 34-year low ahead of US inflation data release

Japan’s Yen slipped to 151.97 against the US dollar, its lowest in the last 34 years, during the Asian market trading session on Wednesday, March 27. The fall in the Japanese currency comes in the wake of the American dollar gaining strength.

The dollar turned stronger following the release of better-than-expected US durable goods orders data on Tuesday, March 26. The order for durable goods increased by 1.8% year-on-year in February, as compared to a fall of 6.2% in January, the data showed.

The decline in Yen also comes ahead of the release of core inflation data by the US Federal Reserve on Friday, March 29. Analysts see the dollar gaining more strength if the inflation numbers further recede the fears of recession.

The yen, at 151.97 per dollar, was trading 0.2% lower as compared to the preceding day. The currency’s value turned weaker as compared to 151.94 a dollar in October 2022 – the lowest since the 1990s – which had compelled the Bank of Japan to take immediate interventionary measures to prevent a further decline.

Yen has emerged as the worst-performing major currency for the quarter ending this week, as its value has declined by 7% against the dollar in the last three months.

The market is expected to become jittery if Yen plunges below the 152 per dollar-mark, analysts said. "The market is very sensitive to the 152 area," news agency Reuters quoted National Australia Bank strategist Rodrigo Catril. "If we were to break that level then recent history would suggest that intervention would be much more likely,” he added.

Japan’s Finance Minister Shunichi Suzuki was reported as saying that the policymakers have not ruled out any option if the value of yen erodes quickly. "Rapid currency moves are undesirable," Suzuki told the local press after a cabinet meeting on Tuesday. The currency’s movement in a stable manner is important, he added.

Notably, the sell-off of yen has intensified following the Bank of Japan’s landmark decision last week to halt the policy of negative interest rates. The rates turned positive for the first time since 2017. The benchmark lending rates now range from 0% to 0.1%.

While a weaker yen aids Japanese exporters by allowing them to clock higher profits, its fallout includes a reduction in households’ wealth. This in turn would hurt the consumption cycle, which is key to Japan’s demand-led economic growth.