Japan's yen has fallen to a 40-year low at 162.83 against the dollar, highlighting that Japan can spend billions defending its currency, but it may not be enough.
Widening U.S.-Japan interest rate differentials continue to support the dollar, and investors believe that intervention solely from Japan is unlikely to reverse the yen's decline.
A 'restrictive for longer' Fed?
Markets are betting that the Federal Reserve may keep monetary policy restrictive for longer:
"The yen's decline may continue as long as U.S. interest rates remain high, while borrowing costs in yen remain low," said Christy Tan, global investment strategist at Franklin Templeton Institute.
The yen's weakness can benefit exporters, but it also raises import prices, which may affect household budgets.
