FX.co ★ Yen Sinks to Fresh 40-Year Low

The Japanese yen weakened past 163 per dollar on Wednesday, its lowest level since October 1986, keeping markets on high alert for potential government intervention to shore up the currency. The decline came as escalating tensions in the Middle East pushed oil prices higher, putting additional strain on Japan’s oil-dependent economy. The yen was further pressured by a stronger US dollar and rising US Treasury yields, with the wide interest rate differential continuing to fuel carry trades. Investor concerns over Japan’s fiscal outlook also intensified after the government announced large-scale spending plans, while the Bank of Japan’s cautious stance on policy normalization added to the downward momentum. On the economic front, Japan’s trade balance swung back into deficit in June as import growth outpaced exports.