Japan's yen is lassoed to the dollar, for better or for worse

What happens in the US economy doesn’t stay there: the Fed’s choice to keep interest rates unchanged could increase pressure pushing down the Japanese yen. On Wednesday, Jerome Powell held interest rates steady at a two-decade high. 

Before sticky interest-rates were announced, the yen on Monday flirted with (but didn’t quite hit) a 160:1 conversion rate with the US dollar. It’s widely thought that Japanese authorities intervened to prop up the yen by buying yen and selling dollars. But the suspected trading spree barely budged the yen’s value, which is the weakest it’s been vs. the dollar since the ’80s. 

Japan’s especially sensitive to US interest-rate decisions because its own rates are ultra-low. The problem: investors buy yen at low borrowing rates but quickly convert it to another currency for higher returns. 

Even just the anticipation (more like dread) of rate-cut delays has contributed to the yen’s slide. When it comes to when the Fed expects confidence to rise enough to slash rates, Powell on Wednesday left investors on read with a big “IDK.”