The Dollar rose close to a 38-year high against the Yen on Tuesday, as Treasury yields surged, driven by investor speculation about the possibility of a second Donald Trump presidency.
Japan's weak Yen contributed to pushing the Nikkei above the psychologically significant 40,000 mark for the first time in three months, distinguishing it from many other regional stock markets that faced challenges.
Meanwhile, crude oil prices continued to climb, bolstered by a robust rally in the previous session, coinciding with the onset of the northern hemisphere summer driving season, Reuters reports.
The greenback hit 161.745 Yen on Tuesday, a level not recorded since December 1986.
The currency pair is exceptionally responsive to US yields, and the benchmark 10-year Treasury yield surged by nearly 14 basis points to 4.479% at the beginning of the week.
Traders are closely monitoring the Yen's weakness amid concerns of potential Japanese intervention, especially after authorities spent approximately 9.8 trillion Yen in late April and early May when the currency fell to 160.82 per Dollar.
On Tuesday, Japanese Finance Minister Shunichi Suzuki reiterated that officials are closely monitoring currency markets but notably refrained from repeating a warning that they are prepared to take action.
“Market participants continued to ignore his comments and appear to be testing the Ministry of Finance's resolve to support the JPY,” said Carol Kong, a strategist at Commonwealth Bank of Australia.
“The path of least resistance is therefore further gains in USD/JPY.”
Elsewhere, the Euro retraced some of its gains against the Dollar on Tuesday following a relief rally, as the far-right National Rally (RN) in France's weekend election did not secure as many votes as some polls had predicted.
The single currency edged down 0.12% to $1.0727, after reaching a high of $1.0776 on Monday for the first time since mid-June.
Whereas Sterling dipped 0.14% to $1.2633.