Yen hits 34-year low as dollar strengthens ahead of key US inflation data

Yet hit 34-year low: The dollar surged on Wednesday following robust US economic data, driving the Japanese yen to its weakest level in 34 years and raising concerns about potential market intervention, reminiscent of actions taken in 2022.

During the Asia session, the yen traded at 151.97 per dollar, marking a decline of approximately 0.2 per cent and hitting its lowest level since the mid-1990s.

The currency's sharp depreciation has made it the worst-performing major currency for the quarter, down over 7 per cent against the dollar despite Japan's recent departure from negative interest rates.

Market jitters have intensified as the yen approaches the critical threshold of 152 per dollar, prompting warnings from Japanese officials against speculative movements. Finance Minister Shunichi Suzuki stressed that Japan remains vigilant and will not hesitate to take action if the yen's decline accelerates.

The sentiment surrounding the yen received a further push lower from comments made by Bank of Japan policymaker Naoki Tamura, advocating for a gradual normalisation of policies.

The dollar's strength extended beyond its impact on the yen, with the Chinese yuan and New Zealand dollar also experiencing selling pressure close to four-month lows.

Despite efforts by the central bank to stabilise the yuan, it weakened to 7.2285 per dollar. Meanwhile, the New Zealand dollar slipped to $0.5988 following downward revisions in economic growth forecasts by New Zealand's Treasury.

Market focus shifted to Friday's release of US core inflation data after overnight reports showed a major increase in durable goods orders in February. 

The euro remained relatively stable, while the Swiss franc continued to struggle after a surprise rate cut in Switzerland, falling to a four-month low against the dollar.

Overall, the US dollar index continued its upward trend for the quarter, reflecting broader strength in the greenback.

Sterling remained steady amidst mixed signals from Bank of England policymakers, with some expressing concerns about overpricing of rate cuts in financial markets.

(With Reuters Inputs)