NEW YORK - The yen fell to a roughly 39-year low near 162 versus the U.S. dollar on Monday, supported by market expectations of higher interest rates in the United States, but its further decline may be capped due to caution that Japanese authorities may step in.
The dollar fetched 161.89-99 yen at 10 a.m. in New York, touching above 161.96 yen, seen as a key barrier. It traded at levels unseen since December 1986.
A weak yen inflates import prices of everything from energy to food, in a blow to resource-poor Japan.
Japan has intervened in the currency market to arrest the yen's decline but the currency's relative weakness has persisted, reflecting the still wide gap between Japan and U.S. interest rates.
The Bank of Japan raised its interest rate earlier this month to a 31-year high of 1.00 percent from 0.75 percent and has left the door open for another hike due to inflation risks caused by the Middle East conflict and rising import costs.
The Federal Reserve, under new chair Kevin Warsh, has also signaled another rate hike before the end of the year, despite U.S. President Donald Trump pushing for rate cuts.
The decline in the yen's value also comes as Prime Minister Sanae Takaichi pushes for more fiscal spending to support growth and a temporary freeze on the country's consumption tax targeting food and beverages.
With debt far bigger than the size of the economy, its fiscal health is the worst among advanced economies.
