The yen dropped to weaker than 125 per dollar for the first time since 2002 as prospects for higher U.S. interest rates this year spurred demand for the greenback.
The U.S. currency is up against 13 of 16 major peers over the past week after Federal Reserve Chair Janet Yellen said in May she expects to raise benchmark borrowing costs in 2015. The yen has dropped more than 30 percent since 2012 as the Bank of Japan carries out unprecedented bond buying. Australia’s dollar traded near its lowest in seven weeks on Tuesday as investors bet on a divergence in monetary policy between the South Pacific nation and the U.S.
“The underlying fundamental is that the BOJ’s quantitative easing measures are still very much in play, so we’re seeing a continuation of the trend of the last couple of years,” said Greg Gibbs, a strategist at Royal Bank of Scotland Plc in Singapore.