Japanese yen traders are increasingly focused on downside protection as the currency’s slide toward historic lows intensifies.
Market participants are now modeling worst-case scenarios that see the yen weaken to 165 per dollar, a level that would mark a new extreme in the ongoing depreciation trend.
The yen has already collapsed to its weakest point against the US dollar in four decades, recently breaching the ¥162 threshold during morning trading in Tokyo.
This move represents the first time the currency has traded at such depressed levels, signaling a breakdown in previous support zones and raising concerns about further volatility.
The primary driver behind these stress tests is the persistent risk of a Federal Reserve interest rate hike later this year.
Former Bank of Japan policymaker Sayuri Shirai has highlighted this specific downside scenario, noting that a hawkish shift in US monetary policy would widen the interest rate differential between the two economies, putting additional pressure on the yen.