Breaking: Yen hits nearly four-decade low against dollar, euro and pound

The Japanese yen continued to weaken against a basket of currencies on Monday, touching its nearly four-decade low against the American dollar after data showed that Japan’s gross domestic product (GDP) contracted by more than expected during the opening quarter.

This development has seemingly dampened hopes of a potential rate hike by the Bank of Japan.

Dollar, euro, and pound gain significant ground

The dollar gained 0.31% against the Japanese yen, selling at 161.3765 at 8:40 am ET, its strongest level since December 1986. At the same time, the euro climbed 0.58% compared to the Japanese currency, changing hands for 173.3685, its highest point since 1992 in the aftermath of snap elections in France.

The pound sterling rose 0.44% against the yen, reaching 204.3490, its peak since 2008.

Market reactions and implications

Japan’s economy has been grappling with stagnation, and the recent GDP data further emphasises the challenges. The contraction in the GDP has cast doubts on the country’s economic recovery, influencing the yen’s performance.

Analysts believe that the Bank of Japan may now face increased pressure to maintain its ultra-loose monetary policy, which could keep the yen under pressure for an extended period.

The broader implications of this yen weakening are multifaceted. Import-dependent sectors in Japan may experience increased costs, potentially impacting consumer prices and overall economic stability.

Conversely, Japanese exporters could benefit from a weaker yen, as their goods become more competitively priced on the international market.

Investors are closely watching the Bank of Japan’s next moves, as any indications of policy shifts could significantly impact currency markets. For now, the yen’s decline reflects the ongoing economic uncertainties and the complex interplay of global market forces.

(This is a developing story. More inputs will be added soon.)

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