The Japanese yen fell to a fresh 20-year low against the U.S. dollar Tuesday, briefly touching the 133 line, on expectations that the interest rate gap will widen between Japan and the United States.
The Japanese currency sank to 133.00 against the dollar at one point during Tokyo trading, the lowest level since April 2002, as expectations grew that the U.S. Federal Reserve will continue its aggressive monetary tightening.
On the stock market, the 225-issue Nikkei Stock Average ended up 28.06 points, or 0.10 percent, from Monday at 27,943.95, its highest level since March 30. The broader Topix index finished 7.92 points, or 0.41 percent, higher at 1,947.03.
On the top-tier Prime Market, gainers were led by food, pharmaceutical and information and communication issues.
The yen’s renewed drop came after Bank of Japan Governor Haruhiko Kuroda said Monday the central bank will stick to its powerful monetary easing to realize its 2 percent inflation goal in a sustainable way.
He reiterated the policy outlook in parliament on Tuesday morning after the yen briefly tumbled to around the 132 line in New York. The Japanese unit further lost ground in Oceania and Tokyo trading.
The Fed is expected to decide on another interest rate hike following its two-day policy meeting from June 14. The central bank decided to conduct rate increases during its meeting in March and May to address high inflation in the United States.
“After Governor Kuroda’s comments in parliament in the morning, investors further tested the dollar’s upside as they thought the BOJ will tolerate the yen’s weakness even at the 132 level,” said Yuji Saito, head of the foreign exchange department at Credit Agricole Corporate & Investment Bank in Tokyo.
“Investors will likely test the 135 range, the dollar’s highest level in 2002. There is nothing that could stop that from happening,” he added.
At 5 p.m., the dollar fetched 132.76-78 yen compared with 131.85-95 yen in New York and 130.76-78 yen in Tokyo at 5 p.m. Monday.
The euro was quoted at $1.0687-0688 and 141.88-92 yen against $1.0691-0701 and 141.00-10 yen in New York and $1.0742-0743 and 140.47-51 yen in Tokyo late Monday afternoon.
The Japanese government was on alert Tuesday, with Finance Minister Shunichi Suzuki telling reporters, “We are paying close attention to developments in the foreign exchange market and their impact on the Japanese economy.”
A weaker yen has already led to higher import costs that have subsequently raised the prices of energy and many other products.
The bellwether 10-year Japanese government bond was untraded during the day for the second straight session during regular trading hours.
On the stock market, the benchmark Nikkei briefly rose above the 28,000 mark for the first time in more than two months, lifted by export-related shares that were bought on the yen’s weakness.
However, the index’s gains were trimmed toward the end of trading as investor sentiment was dented by a fall in U.S. stock futures, brokers said.
Among exporters, shares of automakers were notably higher, with Nissan Motor gaining 14.1 yen, or 2.6 percent, to 554.6 yen. Honda Motor rose 83 yen, or 2.5 percent, to 3,382 yen and Mitsubishi Motors went up 13 yen, or 3.2 percent, to 418 yen.
A weaker yen boosts exporters’ profits earned overseas when repatriated.
Among Prime Market issues, advancing issues outnumbered decliners 1,031 to 728, while 79 ended unchanged.
Trading volume on the Prime Market rose to 1,174.58 million shares from Monday’s 1,001.82 million.