The Japanese yen falls past the key level of 150 to the dollar, hitting a 32-year low as officials say they're ready to intervene
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- The Japanese yen slid past 150 against the dollar Thursday for the first time since 1990.
- The breaching of the key level ups pressure on Japan's officials to intervene to shore up the currency.
- The yen's decline has been driven by the difference in interest rate policy in Japan and the US.
The Japanese yen weakened to above 150 to the US dollar for the first time in 32 years, setting the stage for the country's policymakers to intervene in the currency market.
The break of the key level for the first time since August 1990 puts pressure on Japanese officials to step in to contain the yen's steady slide, which has been driven by divergence in interest rate policy between Japan and the US.
Earlier Thursday, before the historic break, Japan's finance minister said he would take decisive action against big moves in the yen, Reuters reported.
"We cannot tolerate excessive, rapid currency market moves driven by speculative action. We will continue to watch currency moves meticulously and with a sense of urgency," Shunichi Suzuki said, per Reuters.
The yen fell as low as 150.09 to the dollar earlier Thursday, but has retraced some of that loss to trade broadly flat at 149.86 at last check.
The Japanese currency has sold off heavily against the dollar, falling 23% this year so far, as the Bank of Japan holds to its ultra-low interest rates while the US Federal Reserve hikes rates aggressively. Return-hungry investors have bought dollars to take advantage of this, prompting a "reverse currency war" as the dollar surges to 20-year highs and central banks scramble to keep up with the Fed.
Japan — which has historically devalued the yen to favor its export-driven economy — was forced to intervene in currency markets in September for the first time since 1998, by snapping up more yen and dumping dollars in a bid to prop up the weakening currency.
Policymakers at Japan's central bank ruled out any change in its ultra-easy monetary policy to prop up the yen, Reuters reported.
"Little has changed for the yen with Japanese officials seemingly willing to let the currency weaken further by capping bond yields," Nick Cawley, senior strategist at IG's DailyFX, said.
Yields on the 10-year Japanese government bond are capped at 0.25%, while US 10-year Treasury yields are trading at multiyear highs around 4% — about 375 basis points higher, Cawley pointed out.
The BoJ earlier Thursday said it was launching an emergency bond buying scheme to defend the cap, after the yield broke through the 0.25% level.
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