Yen Slides to Weakest Level Since July 2024 Amid Crypto Contagion Risk

The Japanese yen has hit its weakest level against the US dollar since July 2024, reaching around 160 per USD. This development raises concerns about a potential crypto contagion risk.

Despite the Bank of Japan raising its policy rate by 25 basis points to 1% in June 2026, the interest rate differential between the US and Japan remains wide, fueling the yen carry trade.

This trade involves investors borrowing yen at low rates, converting it into dollars or other currencies, and investing in higher-yielding assets. The continued existence of this trade keeps the yen under pressure.

A significant portion of leveraged positions in cryptocurrencies like Bitcoin are funded through yen-denominated borrowing. If the yen strengthens rapidly, these positions may be forced to liquidate, leading to a sharp decline in crypto markets.