The yen fell to a record low against the euro on Thursday and hovered near a nine-month low versus the dollar. The drop came after Japan’s new prime minister said she preferred the Bank of Japan to move slowly on raising interest rates.
The Australian dollar, meanwhile, climbed to a two-week high. Strong labor market data showed a sharper-than-expected fall in unemployment, reducing the likelihood of further rate cuts by the Reserve Bank of Australia.
Currency markets may face volatility in the coming days as delayed U.S. economic reports begin to return following the end of the long government shutdown. Still, the White House warned that October’s jobs and inflation figures may never be released.
The yen briefly touched a historic low of 179.50 per euro early Thursday before stabilizing at 179.43. Against the dollar, it weakened to 155.02, just above Wednesday’s nine-month low of 155.05. In afternoon Asian trade, it stood at 154.91.
The euro edged slightly lower to $1.1585.
Japan’s Prime Minister Sanae Takaichi said on Wednesday that her administration favored keeping interest rates low and emphasized close coordination with the Bank of Japan.
Finance Minister Satsuki Katayama also issued a fresh warning about the yen’s fast decline as it neared 155 per dollar, referring to “one-sided and rapid movements” in the currency market.
The yen’s weakness increases the risk of higher food and energy inflation. Some analysts say the pressure could push the Bank of Japan toward a rate hike next month. Markets currently assign a 22% chance of a quarter-point increase in December, rising to 43% for January.
Norihiro Yamaguchi of Oxford Economics said the yen’s slide was making the government increasingly uneasy, noting that exchange-rate stability was crucial for the administration. He added that Tokyo may eventually need to accept BOJ rate hikes to help stabilize the currency.
In Australia, traders sharply reduced expectations of a December rate cut to just 6% after this week’s strong economic data.
Thursday’s report showed a solid increase in employment in October, driven by more full-time hiring. The figures eased concerns about a sudden slowdown in the labor market.
ANZ analysts said the numbers supported the RBA’s view that labor market conditions “remain a little tight,” reinforcing expectations that the bank will hold policy steady next month. They still expect one final rate cut in February, after which the cash rate may stay unchanged for an extended period.
The Australian dollar rose 0.3% to $0.6559, after touching $0.6565 earlier—the highest level since October 30.
