TOKYO - The yen hit a fresh 39-year low beyond 162 against the U.S. dollar on Tuesday amid continuing expectations of Federal Reserve interest rate hikes this year, even as market players remained cautious that Japanese authorities may step in to stem the currency's fall.
The yen briefly weakened to 162.41 in Tokyo, marking its lowest level since December 1986, with analysts saying that dollar-buying by domestic importers at the end of the month for settlement purposes also contributed to the move.
"There is a growing view that it will be difficult for the yen to compete with the dollar if the Fed does go ahead with rate hikes," said Takuya Kanda, senior researcher at the Gaitame.com Research.
Although Japanese Finance Minister Satsuki Katayama warned earlier in the day that the government is "always" ready to act when necessary, in response to the yen's fall against the dollar, the currency market showed little reaction.
According to Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management Co., the yen is already at a level where intervention would not be surprising.
He said, "If the yen's decline accelerates from here, the likelihood of intervention will increase significantly."
At 5 p.m., the dollar fetched 162.25-26 yen compared with 161.90-162.00 yen in New York and 161.82-83 yen in Tokyo at 5 p.m. Monday.
The euro was quoted at $1.1398-1399 and 184.94-98 yen against $1.1418-1428 and 184.98-185.08 yen in New York and $1.1402-1403 and 184.51-55 yen in Tokyo late Monday afternoon.
Tokyo stocks ended higher, with the benchmark Nikkei briefly gaining nearly 1,200 points, as investors were prompted to buy chip and artificial intelligence-related shares after South Korea's tech giants Samsung Electronics Co. and SK Hynix Inc. said the previous day that they will invest a total of about 4,755 trillion won ($3.07 trillion) as part of the government's plan, brokers said.
The market was also supported by overnight gains on Wall Street amid easing concerns over the Middle East conflict after reports that the United States and Iran had agreed to halt attacks against each other.
However, the market briefly slipped into negative territory as overheating concerns persisted. Fears that a weaker yen would lift import costs and weigh on earnings also pressured the market, the brokers said. A weaker yen increases overseas profits when repatriated.
The 225-issue Nikkei Stock Average advanced 594.21 points, or 0.86 percent, from Monday to 70,062.32. The broader Topix index finished 12.76 points, or 0.32 percent, higher at 3,994.76.
On the top-tier Prime Market, the main gainers were nonferrous metal, electric appliance and metal product issues.
The yield on the benchmark 10-year Japanese government bond rose 0.050 percentage point from Monday's close to 2.680 percent as the debt was sold on concerns that the yen's decline would fuel inflation.
