Tokyo to the rescue?

Chart of the Week

The yen has had a turbulent week against the US dollar. On Monday 29 April, the Japanese currency slumped to its lowest level against the dollar since 1990, briefly flirting with 160 yen per dollar before recovering to 153. Significant swings on Monday and Wednesday have triggered speculation that Japanese authorities may have intervened in the currency market, although officials declined to comment.


Since the beginning of 2022, the Japanese yen has been weakening against the US dollar. Resilient US growth is not only strengthening the dollar, but also maintaining the gulf between Japanese and US interest rates. The Bank of Japan (BoJ) is only very gradually adjusting its ultra-loose monetary policy. While its key interest rate remains close to 0%, high rates and restrictive monetary policy have been the norm for the Fed and most Western central banks over the past two years.

The situation is prompting investors to sell the Japanese currency and invest in US money market funds offering yields that now top 5%. Since the start of the year, the prospect of higher-for-longer US interest rates has strengthened the dollar’s appeal against the yen.

Tokyo has repeatedly stated that it stands ready to prop up its currency and operates around the clock.


Written on May 03, 2024. This is not an investment advice. Opinions subject to change.

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