This week, the yen weakened further, continuing its downward trend against the dollar and other major currencies as investors pursued higher yields, anticipating Japan’s interest rates to remain low. The yen’s performance has been the weakest in the G10, with notable drops against the euro, sterling, and the currencies of Australia and New Zealand. The dollar’s slight gain against the yen was tempered by intervention concerns from Japan.
Investors are drawn to carry trades, leveraging Japan’s near-zero interest rates to invest in assets with higher returns. This strategy has gained traction with reduced volatility in foreign exchange markets and adjusted expectations for rate cuts in major economies.
The Australian and New Zealand dollars strengthened, while the euro saw gains due to a shift in rate cut expectations and positive economic data. The U.S. dollar index dipped, and the Chinese yuan remained steady despite policy easing in China. Upcoming comments from European Central Bank officials are awaited.
