The yen may continue its decline against the US dollar, reaching its lowest level since 1986, as traders are not afraid of the prospect of government intervention to support the national currency.
Experts from Sumitomo Mitsui DS Asset Management Co. and Mizuho Bank Ltd said that the growth of USD/JPY to the level of 170 yen per dollar is possible against the background of continued sales of the yen in favor of a higher-yielding US dollar.
Investors now see few catalysts capable of reversing the bearish trend in the yen, which has fallen by almost 12% this year. The yen is currently trading near the level that had prompted a currency intervention from Tokyo in late April and early May.
"It is possible that USD/JPY will reach the 170 level relatively quickly, as short-term intervention just does not work," ATFX Global Markets experts said.
The main pressure on the yen is exerted by the growing difference in interest rates between Japan and the United States. The Federal Reserve has yet to lower the interest rate, which currently stands at 5.5%, while the interest rate of the Bank of Japan is at 0.1%. The same issue applies relative to Europe, with the yen edging toward a record low versus the euro.