Yen at Risk: Dollar's Ascent as U.S. Yields Soar

The Japanese yen struggles against a firming U.S. dollar, influenced by rising U.S. Treasury yields and predictions of economic growth under President-elect Trump. The yen's weakness is tested by potential interventions from Japanese officials, amidst uncertainty of BOJ rate hikes despite low domestic yields.

The Japanese yen sank to a five-month low against the U.S. dollar on Monday, driven by climbing U.S. Treasury yields and thin trading at year-end. The yen traded at 157.82, with intervention from Japan's Finance Ministry looming as a buffer against breaking past the 160 threshold.

Despite widespread forecasts for a weaker dollar in 2024, the greenback remains strong. It continued to rally, bolstered by optimism surrounding President-elect Donald Trump’s economic policies. The dollar index experienced a 2.3% rise for December, making a 6.6% gain over the year.

The yen, pressured by the Federal Reserve’s cautionary stance on rate cuts, hit its lowest since July. Meanwhile, the Bank of Japan showed reluctance to increase interest rates. Japanese officials remain vigilant against extreme yen depreciation, with the potential for intervention in mind.

(With inputs from agencies.)