Japanese Yen Depreciation Remains Unusually Smooth Over Recent Weeks Near 40-Year Low

According to Sean Callow, a senior forex analyst at InTouch Capital Markets, the Japanese yen's depreciation over recent weeks has been notably smooth and orderly, as of July 1. The USD/JPY exchange rate has shown only modest gains, lacking the sharp volatility that Japanese authorities typically cite when justifying forex intervention.

While falling oil prices should theoretically support the yen, interest rate differentials remain the key market driver. Strong U.S. economic data has reinforced expectations for Federal Reserve rate hikes this year, and despite the Bank of Japan's actions in June, a 1% yield is unattractive for a currency trading near 40-year lows against the dollar.