The Japanese yen weakened against the U.S. dollar and euro on Tuesday, reaching multi-year lows. This has investors closely watching for potential intervention from the Bank of Japan ahead of its policy meeting this week.
The euro reached its highest level since 2008 against the yen, at 165.71, after data showed a faster pace of business activity in the eurozone. The dollar also rose to a 34-year peak of 154.88 against the yen, nearing the 155 level that market participants see as a potential trigger for Japanese intervention.
Analysts believe that the Bank of Japan is unlikely to raise interest rates solely to strengthen the yen, but there is a possibility of intervention from currency officials following the meeting on Friday. The BOJ is expected to maintain its current stance on Friday, which could lead to further yen weakness. However, there is a chance of market intervention that same night to prevent a more significant decline towards 160.
Japanese Finance Minister Shunichi Suzuki has issued his strongest warning yet on the possibility of intervention, stating that last week's meeting with his U.S. and South Korean counterparts laid the groundwork for Tokyo to act against excessive yen movements. However, there are doubts about whether Tokyo will take action so close to the BOJ's policy meeting.
The dollar weakened slightly against the yen after data showed a decline in U.S. business activity in April. The euro, meanwhile, climbed to a two-week peak against the dollar before retreating slightly. The British pound also weakened near its lowest level in months due to dovish comments from Bank of England policymakers.