The yen hovers near levels last seen in 1986 as traders weigh potential Japanese intervention amid Fed rate hike expectations.
The dollar steadied near 161.3 yen on Friday, just shy of a 40-year high, as markets digested the Federal Reserve’s hawkish tilt. The yen’s decline accelerated after Fed policymakers signaled potential rate hikes by year-end, with nine of 19 officials projecting increases in their latest projections.
The dollar index rose to a 13-month peak this week, up 1% against major currencies, driven by Wednesday’s Fed meeting. The yen’s slide to 161.8 on Thursday approached July’s high of 161.96, a level not seen since 1986. Traders remain cautious, recalling Japan’s currency interventions in April and May to support the yen.
Liquidity may be thinner due to a U.S. holiday, potentially increasing volatility. Analysts suggest strong U.S. data could further price in Fed hikes, while a lack of intervention might embolden speculators to test yen weakness.