Yen Weakness Persists Despite Intervention Efforts

The Japanese Yen has continued its downward trend against the US Dollar, breaking above 159 per dollar for the second time recently. Despite recent intervention efforts and signals from the Bank of Japan, the yen remains fundamentally weak, according to Commerzbank analyst Volkmar Baur.

Baur notes that while the current account and credit data are strong, rising Japanese equities and associated hedge adjustments are putting pressure on the yen until the Bank of Japan clarifies its rate-hike plans. The Nikkei index has risen 35% this year, leading to currency-hedged positions being adjusted, which in turn weighs on the JPY.

The Bank of Japan's meeting and subsequent press conference by Governor Ueda provided some subtle signals that interest rates may be raised more quickly than previously indicated. However, market participants still seem uncertain about the bank's intentions, keeping the yen under pressure.