The Japanese yen has fallen to its lowest level against the US dollar since August 1998, prompting the government to consider measures.
The dollar’s rebound comes on data suggesting that the jobs market in the world’s largest economy is recovering.
On Thursday, the currency pair broke the key psychological level of 140 yen against the US dollar.
While many central banks in Asia have raised borrowing costs to emulate the US, Japan has not followed suit.
The Bank of Japan has maintained ultra-low interest rates to support the economic recovery and this is one of the reasons the yen has weakened against the US dollar and other major currencies.
Higher interest rates usually attract foreign investment. This increases demand and the value of currencies from countries with higher interest rates.
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A report by the U.S. Department of Labor on Thursday showed that the number of Americans filing new jobless claims fell to a two-month low, suggesting the job market is recovering from the pandemic.
This sparked buying interest in the US dollar, which propelled it to a new high of 140.23 yen against the Japanese currency.
But it wasn’t the only currency affected by dollar strength.
The British pound slipped by around 5% for the first time since October 2016.
The US dollar gained momentum earlier in the week after Federal Reserve Chair Jerome Powell said the Federal Reserve would raise interest rates further in the coming months.
Mr Powell added that the Fed could keep rates high “for some time” at an annual conference in Jackson Hole, Wyoming.
“That’s a strong USD story this week after the aggressive Jackson Hole forum,” Philip Wee, senior currency economist at DBS Bank, told the BBC.
“From here, more Asian central banks are poised to rise, some larger than usual. This should help offset some of the pressure from the strong USD,” he added.
On Friday, Japanese Finance Minister Shunichi Suzuki said the government would take “appropriate” measures to address the yen’s depreciation.
“Excessive, disorderly currency moves could have negative implications for the economy and financial conditions,” Mr Suzuki told a news conference.
However, State Street Global Markets’ Dwyfor Evans told the BBC that given the gap between interest rates in Japan and much of the rest of the world, moves to strengthen the yen “could prove futile”.
The Bank of Japan last intervened in foreign exchange markets in 2011 after an earthquake and tsunami triggered the Fukushima nuclear crisis.
On Friday midday in Asia, the yen continued to slide, trading around 140.35 against the dollar.
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