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dicetable| Set a new low in 34 years! The yen exchange rate accelerates its depreciation. Super "black swan" strikes?

Beverage 2024-04-27 22:06 20 editor

Transferred from: APP, Financial Associations

Financial Associated Press, April 27 (Editor Zhao Hao) this weekDicetableThe exchange rate of the Japanese yen has successively fallen below several integer levels, refreshing for 34 years.DicetableThe decline even showed signs of accelerating, especially after the Bank of Japan announced that it would maintain the status quo of loose monetary policy.

The specific market shows that the US dollar against the Japanese yen was last traded at 158 in New York.Dicetable.30, up nearly 1% on FridayDicetableAt one point, it rose to 158.44 within the day, the highest level since 1990. The currency pair broke through the four integer levels of 155, 156, 157 and 158 this week, with the last three breaking in one day on Friday.

On the same day, the Bank of Japan announced that it would maintain short-term interest rates in the range of 0% to 0.1%. On the closely watched reduction in bond purchases, the bank said it would "follow the guidelines decided at its March 2024 meeting", without explicitly mentioning the amount of the reduction.

At a news conference, President Kazuo Ueda said that while the exchange rate may be an important factor affecting inflation, "the weakness of the yen has not yet had a significant impact on potential price trends." Before the resolution, some economists had expected the Bank of Japan to release hawkish messages to prop up the yen, but that idea apparently fell through.

Later in the day, the core personal consumption expenditure (PCE) price index released in the US recorded 2.8 per cent year-on-year growth in March, and the market had expected the Fed's favorite inflation measure to slow to 2.7 per cent, delaying the expected timing of the Fed's first rate cut.

dicetable| Set a new low in 34 years! The yen exchange rate accelerates its depreciation. Super "black swan" strikes?

Recently, a number of inflation data have damped the Fed's interest rate cut expectations, pushing the dollar index above 106, which has also weighed on non-US currencies. Since the beginning of the year, the yen has depreciated by nearly 11% against the dollar, making it the worst performing currency in the Group of Ten (G10). The main factor driving the divergence between the yen and the dollar is the spread between the national debt of the two countries.

Generally speaking, currencies with higher interest rates are more likely to be bought, while currencies with lower interest rates are easier to sell. The "carry trade" of raising money in low-interest-rate yen and buying high-interest-rate currencies is devaluing the yen. Some media pointed out that on the eve of the Bank of Japan meeting, traders also increased their short positions in the yen.

On the day of the resolution, Japanese Finance Minister Suzuki Shunichi said he would continue to "pay close attention to the developments in the foreign exchange market and take comprehensive measures." Earlier this week, the finance ministers of the United States, Japan and South Korea issued a joint statement acknowledging concerns about the recent depreciation of the Korean won and yen and agreeing to cooperate closely on the development of foreign exchange markets.

The market is tense.

Justin Onuekwusi, chief investment officer of St James Place Management, commented that the yen's weakness was unbelievable. "We think the yen has gone too far, and there is no doubt that this will cause concern."

Charu Chanana, a strategist at Saxo Capital Markets, said the BoJ has once again proved that they can be "dovish" to a level that even doves are surprised by. "We are back to the stage of waiting for the authorities to intervene, but without the support of hawkish policies, intervention is still futile."

Japan will enter the Golden week off next week, exporters and other companies will stop buying yen, and fears of further devaluation are spreading in the market. Hirofumi Suzuki, chief foreign exchange strategist at Sumitomo Mitsui Bank, said the authorities would decide whether to act based on the rate of depreciation of the yen, just as they intervened in September 2022.

In the decision of the Bank of Japan in September 2022, the then governor, Toshihiko Kuroda, made dovish remarks, leading to a rapid depreciation of the yen. Government data released later showed that as of October of that year, the authorities had intervened in the market three times, spending a total of more than 9 trillion yen.

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