The yen is set for its steepest weekly fall since May, sliding to fresh 40-year lows against a dollar lifted by higher Treasury yields. Tokyo’s pledges to steady the currency have had little effect, and a possible Bank of Japan inflation downgrade signals that rates will stay low.
The yen is on course for its steepest weekly decline since May, having sunk to new 40-year lows against the dollar despite Japan’s pledges to stabilise it. Verbal support has done little, and some analysts say even direct intervention would only buy policymakers extra time.
That decline runs to nearly 5% in 2026, in line with losses in the Norwegian and Swedish crowns. Against that slide, the dollar was poised for a weekly gain of 0.89%, its biggest since May.
Meanwhile, the U.S. Treasury Department on Thursday joined calls for the BOJ to raise rates, warning that excessive currency volatility was undesirable. According to Reuters, Lazard Asset Management’s Christian Antúnez said intervention was buying time rather than direction: “Intervention is fighting a fundamentals-driven move”.
Cooling inflation keeps the BOJ on hold
Unless the BOJ speeds up rate hikes, analysts say, the structural pressure on the yen is likely to persist. Yet the central bank has little reason to tighten now.
Nikkei reported that the BOJ may cut its core CPI growth outlook for fiscal 2026 from the 2.8% projected in April. Core inflation ran at just 1.4% in May and 1.6% in June, both under the BOJ’s 2% target. The bank is widely anticipated to hold its policy rates steady.
Rising yields and oil lift the dollar
Behind the dollar’s advance sits a shift in the U.S. inflation outlook. Benign June inflation data briefly raised hopes that price pressures would cool, but the escalating Middle East conflict has revived concerns about higher energy costs. Oil prices topped $100 a barrel this week for the first time in nearly two months.
Federal Reserve Chair Kevin Warsh has repeatedly said the central bank is committed to its 2% inflation target. Two-year Treasury yields hovered at 4.3306%, their highest since February 2025, while the 30-year yield held above 5%.
Sources: Investing.com, Crypto Briefing
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