The Japanese yen hovered near a 34-year low against the U.S. dollar on Tuesday, with investors closely monitoring the currency for possible intervention by Japanese authorities as it approaches the 155.00 level. Traders are wary of this threshold, which has triggered past interventions.
However, doubts remain about whether Tokyo will act before the Bank of Japan’s (BOJ) two-day policy meeting starting on Thursday. The central bank is expected to project inflation staying around its 2% target for the next three years, indicating its readiness to raise interest rates from current near-zero levels.
The weak yen complicates the BOJ’s policy path, with some market players expecting pressure for earlier rate hikes to slow the currency’s decline. Japan’s Finance Minister Shunichi Suzuki has expressed concern about speculative currency moves and has indicated close coordination with overseas counterparts to address excessive volatility.
The dollar’s strength has been broad-based, with gains approaching 5% this year. It was trading around 106.09, below last week’s five-month highs, as Federal Reserve officials’ comments and hotter-than-expected inflation data led to a reassessment of rate cut expectations.
Markets currently price a 46% chance of the Fed’s first rate cut in September and a 42% chance in November. This is a sharp contrast to earlier expectations of a June easing cycle. Investors will assess the U.S. economy’s strength this week with the release of first-quarter gross domestic product data on Thursday and the personal consumption price expenditures (PCE) index, the Fed’s preferred inflation measure, on Friday.
