Yen sinks to record low vs euro as Japan PM touts slow rate hikes
Banknotes of Japanese yen are seen in this illustration picture taken September 23, 2022. REUTERS/Florence Lo/Illustration
TOKYO :The yen dipped to a record low versus the euro and wallowed near a nine-month trough against the dollar on Thursday after Japan's new prime minister said she wanted the central bank to go slow on interest rate hikes.
The Australian dollar climbed to a two-week high, buoyed by official data showing a steeper drop in the unemployment rate from a recent four-year high than economists had forecast, reducing the possibility of further rate cuts.
Currency markets could face volatility over coming days with the release of a backlog of economic data, after the prolonged U.S. government shutdown ended late on Wednesday. However, the White House said that jobs and consumer price figures for October may never be released.
The yen slipped to an unprecedented 179.50 per euro early on Thursday before bouncing back to trade at 179.43.
The Japanese currency slipped as low as 155.02 per dollar, putting it just a whisker away from Wednesday's trough of 155.05, a level not seen since early February. It was changing hands at 154.91 in the Asian afternoon.
The euro eased slightly to $1.1585.
Japanese Prime Minister Sanae Takaichi on Wednesday expressed her administration's preference for interest rates to stay low and asked for close coordination with the Bank of Japan.
The same day, Japanese Finance Minister Satsuki Katayama gave a new verbal warning on yen weakness as it approached 155 per dollar, noting "one-sided and rapid movements in the foreign exchange market."
A weak yen could force the BOJ's hand, leading to a rate hike next month. Traders see a 22 per cent chance of a quarter-point increase to the key rate in December, rising to 43 per cent odds for a hike by January.
"The yen's weakness ... is likely making the government increasingly nervous," as it risks reigniting food and energy inflation, said Norihiro Yamaguchi, an economist at Oxford Economics.
"The exchange rate is crucial to the survival of the administration," he said. "To mitigate yen weakness, the government has to accept the Bank of Japan's rate hikes in the end."
In Australia, traders have cut bets for a quarter-point rate cut in December to just 6 per cent following some solid economic data this week.
Thursday's job figures showed employment jumped in October as firms took on more full-time workers, calming fears the labour market was slowing sharply.
"Today's results likely reaffirm the RBA's position that labour market conditions 'remain a little tight'," reinforcing market expectations for the central bank to keep policy steady next month, ANZ analysts wrote in a note.
"We still expect the RBA will cut the cash rate one final time next year, likely in February, and then keep the cash rate at 3.35 per cent for an extended period."
The Aussie gained 0.3 per cent to $0.6559, and earlier touched $0.6565, the strongest level since October 30.
