The yen fluctuates again due to the prospect of interest rate gap between the US and Japan... Threat of 160 yen per dollar
The yen-dollar exchange rate is in the low 160 yen per dollar range due to the prospect of accelerating U.S. interest rate hikes.
Quick Look
- Due to the prospect of an accelerated increase in U.S. interest rates, the value of the yen fell to its lowest level in about two months.
- In the Tokyo foreign exchange market, the yen-dollar exchange rate was traded at 159.91 yen per dollar, and Japanese financial authorities began keeping a check on the possibility of market intervention.
AI-generated summary
Why It Matters
As the U.S. Consumer Price Index (CPI) exceeded market expectations, projections were raised that the Federal Reserve System (FRB) would accelerate its pace of interest rate hikes. It is expected that the Bank of Japan will likely raise the base interest rate at its financial policy decision meeting on the 17th and 18th of next month, but there are also observations of a speed adjustment.
The value of the yen fell to its lowest level in about two months as expectations arose that the interest rate gap in the United States would accelerate and that the interest rate gap with Japan would widen.
At noon on the 13th in the Tokyo foreign exchange market, the yen/dollar exchange rate was trading at the level of 159.91 yen per dollar, 0.21 yen stronger than the previous day.
The previous day (local time) in the New York foreign exchange market, as the movement of selling yen and buying dollars continued, the yen/dollar exchange rate rose to the low 160 yen range, the highest level in two months since early September.
The decline in the value of the yen is attributed to the fact that the recently announced U.S. Consumer Price Index (CPI) exceeded market expectations, supporting the forecast that the U.S. Federal Reserve (FRB) will increase the pace of interest rate hikes in the future.
It is predicted that the Bank of Japan is likely to raise the base interest rate at the financial policy decision meeting held on the 17th and 18th of next month, but some are cautious about increasing the pace of interest rate increases, and some are speculating that it may be trying to control the pace.
At a press conference the day before, Doichiro Asada, a member of the Bank of Japan's deliberation committee, mentioned the risk that further interest rate increases would shrink the economy and said, "Careful judgment is needed regarding the speed and pace of interest rate increases."
It seems that the yen, which had been quiet for a while, is starting again due to expectations that the interest rate gap with the United States will widen further if the Bank of Japan reduces the pace of interest rate increases.
Japanese financial authorities immediately took action to keep things in check.
Regarding the flow of the yen/dollar exchange rate, Finance Minister Satsuki Katayama kept market movements in check at a press conference on the 13th, saying, "Recently, there has been a unilateral and rapid movement. We will cooperate closely with the U.S. Treasury and respond appropriately."
In relation to this, Kyodo News reported that in the Tokyo foreign exchange market, there is growing caution that the government and the Bank of Japan may intervene in the market to protect the value of the yen.
What to Watch
AI outlook — possibilities, not facts
There is a high possibility that the Bank of Japan will raise the base interest rate at its financial policy decision meeting on the 17th and 18th of next month.
Likely · Within weeks
There is a possibility that Japan's financial authorities and the Bank of Japan will intervene in the foreign exchange market to protect the value of the yen.
Possible · Within days
Open Questions
- Will the Bank of Japan actually raise interest rates?
- Will Japan's financial authorities actually intervene in the market to defend the value of the yen?
- The pace and scale of future interest rate increases by the U.S. Federal Reserve
