Investing.com — The Japanese yen fell further on Thursday, with the USD/JPY pair rising to its highest points in 38 years while surpassing previous levels that traders believed would attract Japanese government intervention.
The yen pair, which measures the number of yen needed to buy one dollar, rose to 160.81 yen in morning trading, reaching its highest level since 1986.
The pair was trading at 160.56 yen by 20:33 EST (00:33 GMT).
The yen’s weakness came despite Japanese officials warning this week that they would intervene in the event of “excessive” volatility in the currency market.
Traders were assuming that the authorities would intervene after the USD/JPY broke the 160 level, given that they did so in May, selling billions of dollars and buying yen en masse to support the currency.
However, the movement of the USDJPY pair so far indicates that no supportive measures have been taken.
The yen’s latest bout of weakness comes after dovish signals from the Bank of Japan at its meeting earlier in June. A lack of clarity on when and how the central bank plans to tighten policy has kept traders short the Japanese currency.
Weakness in the Japanese economy has also cast doubt on the Bank of Japan’s ability to tighten policy and raise interest rates further, following their historic hike in March.
However, recent economic data showed some improvement in the economy. May retail sales data came in stronger than expected, thanks to higher wages.
The Bank of Japan expects rising wages to boost consumption in the coming months, which could give the central bank some room to tighten policy further.
But the biggest pressure point on the yen is the possibility of higher US interest rates. The widening gap between US and Japanese interest rates, which was in negative territory until March, kept traders largely biased towards the dollar and short of the yen.