FX.co ★ Yen Pressured by Weak Fundamentals

The Japanese yen hovered around 159.4 per dollar on Friday, struggling to build on the gains achieved after last month’s joint intervention by Tokyo and Washington, as persistent structural weaknesses continued to pressure the currency. The wide interest rate differential between Japan and other major economies remained a key drag, encouraging investors to borrow cheaply in yen and seek higher returns in overseas assets. Growing fiscal concerns in Japan and elevated oil prices linked to the conflict in the Middle East further reinforced the bearish outlook for the yen.

On the monetary policy front, the Bank of Japan is increasingly expected to raise interest rates in September amid mounting concerns over yen weakness and import-driven inflation. Meanwhile, data showed that Japan’s unemployment rate fell to 2.4% in July, its lowest level in a year, while Tokyo’s inflation rate accelerated to a five-month high in August.