2022-06-07 20:45 PM
The yen fell to a 20-year low against the dollar as the gap between Japanese and U.S. interest rates widened due to a Fed rate hike.
[Sina Finance]Zhitong Finance APP was informed that as the interest rate gap between Japan and the United States widened due to the increase in interest rates by the Federal Reserve, the yen fell to a 20-year low against the US dollar, once falling 0.3% to 132.33 per US dollar, and even triggered the Japanese government’s possible exchange rate adjustment. Intervention speculation.
Meanwhile, the yen weakened against other currencies as the Bank of Japan capped yields on benchmark bonds at 0.25%. The yen fell to a seven-year low against the euro as the European Central Bank meets this week to discuss raising interest rates.
Japanese businesses and households have grown increasingly dissatisfied with the negative impact of a continued weakening of the yen as input and energy costs have soared. The Bank of Japan hopes to stimulate inflation, and the Japanese government is trying to avoid rising living costs due to the national elections in the next few months.
“The Bank of Japan is now the only central bank in the developed world that has not tightened monetary policy, and the yen is the only loser,” said Takuya Kanda, general manager of Gaitame.com Research Institute, an investment research firm in Tokyo. “The technical next target is 135.15, Both 132 and 133 will be breached.”
The yen has continued to weaken this year as the dovish Bank of Japan has kept the country’s bond yields steady in a bid to boost a sluggish economy, while U.S. bond yields have risen. Japan’s currency, as an energy importer, has also been affected due to rising oil prices.
On Tuesday, Japanese Finance Minister Shunichi Suzuki said the government was monitoring the currency “urgently” and reiterated that “disorderly movements” in the yen could have a negative impact.
However, Bank of Japan Governor Haruhiko Kuroda affirmed in his speech on Monday that monetary policy tightening is still not on the agenda. This suggests that Japan’s economy still needs more time to recover as wages have not grown enough.
Wells Fargo strategist Brendan McKenna said the interest rate gap between the dollar and the yen is unlikely to reverse anytime soon. “We expect the Fed to continue raising rates and the Bank of Japan to keep rates on hold. As long as these conditions exist, the yen will continue to weaken,” he said.