Despite stepped-up warnings by Japanese authorities, the yen looks on course to lose more of its value to the U.S. dollar, as market players are unfazed by the dangled threat of intervention in foreign exchange markets.
Even if such an intervention becomes a reality to arrest the yen’s decline, the chances are that it will be a drop in the ocean and do little to reverse the trend of a strong dollar, unless the Bank of Japan changes its dovish stance — an unlikely scenario, market analysts say.
The yen has already broken past barriers seen as psychologically important for market participants and defense lines for Japanese authorities, including BOJ Governor Haruhiko Kuroda.
After what Japanese government officials describe as “rapid, one-sided” moves, the yen already at its lowest level in 24 years, could fall toward 148 before the end of the year, according to analysts.
Market players say the recent fast-paced selling of the yen may be somewhat excessive, but recent moves reflect economic fundamentals, — a key factor for Japanese authorities.
As the U.S. Federal Reserve is keen on continuing rate hikes to tame inflation and the BOJ is unlikely to budge for a while, a stronger dollar against the yen should persist, they added.