On September 16, the Japanese yen broke through the key psychological threshold of 140 against the US dollar for the first time since July 2023, continuing its rally from its near 38-year low in July. The yen is the best-performing G10 currency this quarter, rising 15% as investors anticipate a further narrowing of the interest rate gap between the United States and Japan.

The Federal Reserve is widely expected to cut interest rates this week, the only question being by how much, while the Bank of Japan is expected to stand pat on Friday after raising rates twice this year.

“It’s largely the Fed countdown, and the risk that they could cut by 50 basis points this week instead of 25,” said Gareth Berry, strategist at Macquarie Group in Singapore, which has supported the yen. “Even if expectations of Fed easing haven’t changed, the passage of time alone is pushing dollar-yen lower.”

The yen’s fortunes have dramatically changed since it hit a low of 161.95 against the US dollar on July 3. Japan had previously intervened in the market multiple times to boost the yen, but now the yen’s rise has become too rapid, impacting the outlook for exporters and subsequently the Japanese stock market. (Gold Ten)