The Japanese yen has fallen to its lowest point against the US dollar since August 1998, causing the government to consider taking action.
Data indicating that the world’s largest economy’s labour market is improving is what has caused the dollar to increase.
On Thursday, the currency pair broke through the crucial psychological barrier of 140 yen per dollar.
Japan has not increased borrowing costs to match those in Asia, although numerous central banks have done so.
One of the reasons the yen has declined in value relative to the US dollar and other major currencies is because the Bank of Japan has maintained its ultra-low interest rates to stimulate economic recovery.
Higher interest rates frequently attract foreign investment. The demand for and value of currencies from nations with higher interest rates rises as a result.
According to US Labor Department data released on Thursday, the number of Americans requesting new jobless benefits decreased to a two-month low, indicating that the job market is rebounding following the epidemic.
Due to increased buying activity, as a result, the US dollar reached a new high versus the Japanese yen at 140.23.
However, it wasn’t the only currency impacted by the strong dollar.
For the first time since October 2016, the value of the British pound dropped by about 5%.
Early in the week, the US dollar gained strength as Federal Reserve chairman Jerome Powell declared that the US central bank would keep raising interest rates.
At a yearly conference in Jackson Hole, Wyoming, Mr Powell further stated that the Fed may maintain high rates “for some time.”
After the hawkish Jackson Hole discussion, Philip Wee, senior currency analyst at DBS Bank, remarked, “The USD story this week is solid.”
“From this point on, more Asian central banks are prepared to increase, some by higher amounts than normal. “This ought to lessen some of the stress caused by the strong USD,” he added.