Why the Aussie dollar is climbing back towards a 36-year high against the yen

Per The Conversation, the Australian dollar is climbing toward its highest level against the Japanese yen in 36 years. For Australians planning a trip to Japan, that's welcome news—your dollars go further. But the US and Japan governments are deeply concerned. At the end of July, they jointly intervened in currency markets, buying tens of billions of dollars of yen in a single day to prop up its value. Their worries overlap but differ. For Japan, a weak yen makes imports much more expensive, straining household budgets—even as it helps exporters. For the US, the stakes are about leverage: Japan holds more than one point one four trillion dollars of American government debt, the US government's largest single creditor. A deeply weakened yen could force Japan to sell those bonds to raise cash, pushing up interest rates globally. There's also the carry trade complicating things: banks borrowing cheap yen and investing in higher-rate currencies to profit. If that unwinds rapidly, as it did in 2024, it triggers significant market volatility. The intervention worked temporarily, but the yen has since weakened again.

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