On October 23, the Japanese yen fell to its lowest level against the US dollar in nearly three months, sparking speculation about whether the Japanese government will intervene. During the session, the yen fell by 1.4% at one point, hitting a low of 153.19, with a closing price of 152.67, marking the lowest level since the end of July.
The yen's depreciation is primarily driven by the strengthening of the US dollar. The USD/JPY broke through the critical 200-day moving average of 151.38, which analysts believe opens up space for further rises in the currency pair. The Federal Reserve's cautious approach to rate cuts has pushed up US Treasury yields, fueling the dollar's strength and further suppressing the value of the yen. Analysts predict that by the end of the year, the dollar against the yen may approach 155.
Bank of Japan Governor Kazuo Ueda indicated that the timing and extent of rate hikes are being carefully considered, adding more uncertainty to the market. Daiwa Securities' foreign exchange strategist believes that the yen could weaken further, and if the situation continues to worsen, Japanese authorities may intervene in the foreign exchange market.
Additionally, analysis from Nomura International pointed out that the yen has played an important role as a tool for easing macroeconomic pressure in Japan, and a signal of a rate hike may be conveyed at the Bank of Japan's policy meeting next week.
Meanwhile, Japan's ruling Liberal Democratic Party may lose its absolute majority in the House of Representatives in this month's election, adding to market concerns. Reports from various Japanese media indicate that if the Liberal Democratic Party loses majority seats, it might need to rely on coalition partner Komeito's support to maintain control of the House of Representatives.
Globally, all G10 currencies have shown a trend of declining against the US dollar this month, and with the US election approaching, the market expects the Federal Reserve's monetary policy easing to be slower than anticipated. The yen has fallen by about 6% against the dollar in October, making it potentially the worst-performing month since April 2022.
