The U.S. dollar strengthened on Thursday, extending its sharpest rise in six weeks after Federal Reserve minutes reduced the likelihood of a December rate cut. At the same time, the Japanese yen continued to fall as traders grew more confident that Tokyo would not intervene immediately to support the currency.
During the Asian session, the yen dropped to a 10-month low of 157.48. The decline deepened after Finance Minister Satsuki Katayama confirmed that foreign exchange issues were not discussed in a recent meeting with Bank of Japan Governor Kazuo Ueda.
The yen has now lost roughly 6% since Prime Minister Sanae Takaichi became party leader. This weakness has persisted despite rising Japanese bond yields, as investors remain worried about the scale of borrowing required to finance her stimulus agenda.
Vishnu Varathan, head of research at Mizuho in Asia, said markets are now divided between those who believe there is an emerging “Sell Japan” narrative and those who think long-held currency relationships have simply become unstable.
With the yen sliding past 157 per dollar, traders increasingly expect potential intervention near the 160 level or earlier if volatility spikes. Chief Cabinet Secretary Minoru Kihara said the latest yen moves were sharp, one-sided, and concerning.
Outside Japan, other major currencies also weakened against the dollar. The euro, British pound, New Zealand dollar, and Australian dollar all fell after the Fed’s October meeting minutes showed that “many” officials had already dismissed the possibility of a December rate cut, while “several” still saw one as possible.
Moh Siong Sim, strategist at the Bank of Singapore, said the language leaned hawkish, giving the dollar additional support. In the Asian trading session, the euro slipped to a two-week low of $1.1510, while the pound edged down to $1.3040.
The New Zealand dollar had already fallen 1% on Wednesday, touching a seven-month low of $0.5591 as interest rate expectations between New Zealand and the U.S. diverged. It stabilized at $0.5611 on Thursday. Markets are now fully pricing in a rate cut next week in New Zealand, while expectations for a December U.S. rate cut have dropped below 25%, compared with near-certainty only a month earlier.
The dollar index climbed 0.5% overnight and moved above its 200-day moving average. It was last up 0.15% at 100.25.
