The dollar got as far as 159.94 yen in early trading sparking the usual warnings from Japanese officials against “excessive” volatility, shorthand for an intervention alarm. The 160.00 level is seen as a red line for the Japanese given they intervened in late April when the dollar reached 160.245.
The yen’s weakness adds to imported inflation and puts pressure on the Bank of Japan (BoJ) to further unwind its super-easy policies. Minutes of the central bank’s last meeting confirmed there was much discussion about tapering its bond buying and nudging rates higher.
The steady decline in the yen is also rippling across emerging markets, putting Asian currencies under stress as they need to drop to keep exports competitive. The Chinese yuan is up more than 10% on the yen so far this year and near its highest since 1992, a major reason analysts suspect Beijing is massaging its own currency lower over time.
Geopolitics also loomed large, with the first U.S. presidential debate on Thursday and the first round of voting in the French election at the weekend.
An opinion poll out over the weekend showed France’s far right National Rally (RN) party and its allies were leading the first round of the country’s elections with 35.5% of the vote.
