Key facts
- Japanese yen reached 160 per dollar, a level not seen since April 30.
- Japan has spent 11.7 trillion yen ($73.14 billion) on intervention since April.
- Bank of Japan Governor Kazuo Ueda signaled a potential June rate hike.
- Ueda cited inflationary risks from energy shocks as a greater concern than economic downside.
- The dollar fell 0.3% against the yen to 159.40 after Ueda's remarks.
- Economists expect the ECB to raise its deposit rate to 2.25% on June 11, with another increase likely in September.
The Japanese yen weakened to the critical 160 per dollar level, prompting warnings from Finance Minister Satsuki Katayama, as traders anticipate a speech from Bank of Japan Governor Kazuo Ueda. This marks the first time the yen has touched this level since April 30, a period during which Japan conducted a record amount of foreign exchange intervention. Governor Ueda's speech is highly anticipated for potential clues regarding a June rate hike. He stated that the BOJ will continue to raise its policy rate at an 'appropriate pace' if economic and price developments move in line with its baseline scenario, and warned that price pressures from the energy shock might not prove temporary and could push up underlying inflation more than the BOJ projects. The dollar fell 0.3% against the yen to 159.40 after Ueda's remarks, which heightened the chance for the BOJ to raise its policy rate to 1% from 0.75% at its next meeting on June 15 and 16. In Europe, economists polled by Reuters expect the ECB to raise its deposit rate by 25 basis points to 2.25% on June 11, with a further increase likely in September, as inflation remains above target. ECB Governing Council member Pierre Wunsch signaled support for a 25bp rate increase on June 11. The Bank of Japan will debate the pros and cons of raising interest rates, with action possible in June. In the US, the ADP employment report and ISM Services PMI are scheduled, with expectations for the ADP at 120K and ISM Services PMI at 53.8.