The Japanese yen has dropped to a 40-year low against the US dollar, putting investors on watch for potential government intervention by Japan that could ripple through US stocks, the Treasury market and the broader global economy.
The yen’s decline to its lowest level since 1986 has been fueled by a recent shift in expectations for US interest rates, largely due to the war with Iran; and a rebound in the dollar.
The Japanese government stepped in to prop up the yen earlier this year, but failed to halt its slide. With the currency now at fresh multi-decade lows, traders are bracing for another attempt.
Here’s what’s going on:
Traders are betting the US Federal Reserve will likely hold rates steady, or even increase them, in the coming months, to combat inflation spurred by the oil shock from the US-Israeli war with Iran.
