Yen fell in Asian trade on Tuesday against a basket of major rivals, extending losses for the third straight day against the dollar and about to trade below 162 yen per dollar for the first time since 1986 on bets the Bank of Japan won’t normalize the monetary policy this year after GDP contraction in the first quarter.
The yen pierced the 160 barrier against the dollar, and will potentially fall even below 163 then 165 as the Japanese government held off its intervention so far.
The Japanese currency is also hurt by a spike in US 10-year treasury yields ahead of an important Federal Reserve’s speech later today.
The Price
The JPY/USD rose 0.15% to 161.67, with a session-low at 161.41.
The yen lost 0.4% yesterday against the dollar, plumbing 38-year lows at 161.73.
The losses came after the Japanese economy shrank in the first quarter as US treasury yields gained ground.
Japanese GDP Shrinkage
The Japanese government, in a rare unscheduled revision of GDP data, said the GDP shrank by more than expected in the first quarter.
The new data shows the GDP shrank by 2.9% y/y in the first quarter, compared to a 1.8% shrinkage reported earlier.
In a technical memo, the government noted the revision is focused in particular on the weak construction sector.
The data also showed factory activity was flat in June amid weak demand rising costs due to the weaker yen.
The Japanese government appointed a new forex diplomat to oversee the market as the yen sustains heavy losses against major rivals.
US Yields
US 10-year treasury yields rose 0.1% on Tuesday, maintaining gains for the third straight session and almost touching four-week highs at 4.493%.
The developments came ahead of Fed Chair Jerome Powell’s speech later this week in Portugal, which might include clues about the future of US interest rates.
According to the Fedwatch tool, the odds of a Fed 0.25% interest rate cut stood at 65%, and at 78% for November.
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