The Bank of Japan's interest rate hike failed to stop the yen's decline, with the yen approaching a 40-year low

BlockBeats News, June 19 — According to Reuters, despite the Bank of Japan raising interest rates last week to the highest level in 31 years and the Japanese Ministry of Finance intervening in the currency market multiple times this year, the yen remains near a 40-year low against the dollar. On Friday, the USD/JPY exchange rate was 161.12, not far from the two-year high previously reached.

The new U.S. Federal Reserve Chair Kevin Warsh's hawkish statements continue to boost the dollar, while Japan's core inflation has been below the BOJ's 2% target for four consecutive months, weakening market expectations for further rate hikes. Meanwhile, Prime Minister Sanae Takashi's fiscal spending plans have also raised concerns about Japan's fiscal health.

DBS Bank stated that after the BOJ's rate hike this week, yen short positions in the market have not significantly covered, and Japan's tolerance for yen depreciation is nearing its limit. The market expects that when USD/JPY approaches 161.95, the Ministry of Finance may intervene in the currency market again. At the same time, CME FedWatch data shows that the probability of the Fed raising interest rates by 25 basis points in July has risen to 38.5%, up sharply from 8% a week ago, further reinforcing expectations of a strong dollar.