The yen fell to its weakest level since 1986 on suspected intervention by Japanese authorities to prop up the currency.
The Japanese currency fell as much as 0.4 percent to 160.39 (yen) per dollar, exceeding previous levels that led authorities to intervene in the market in April. The yen has lost more than 12% this year, driving up import prices, hurting Japanese consumers and causing growing concern among businesses.
The huge difference between interest rates in Japan – where borrowing costs remain close to zero – and the US has kept pressure on the yen.
All eyes are on Friday’s US inflation data and how the Federal Reserve will process it.
Much is at stake for Japan, which spent a record amount of 9.8 trillion yen ($61.1 billion) in its most recent interventions. Citigroup estimates that the country has between 200 billion and 300 billion dollars in reserves to finance any campaign.
So far this week, authorities in Tokyo have limited their response to verbal warnings.
Finance Minister Shunichi Suzuki said authorities are closely monitoring market developments and will take all possible measures if necessary.
naftemporiki.gr with information from Bloomberg