The Yen Fell To Its Lowest Level
The yen continued to fall against the U.S dollar Thursday in Tokyo, hitting a fresh 24-year low at the ¥139 level, as as a stronger-than-expected U.S. consumer price index raised prospects of aggressive rate hikes by the Federal Reserve.
The yen fell to its lowest level against the dollar since September 1998 after overnight data showed U.S. inflation surged to 9.1% in June from a year earlier, rising at the fastest pace in more than 40 years and exceeding the market consensus of 8.8%.
Dollar-buying by domestic importers for settlement purposes also pushed the yen down, dealers said.
“The strong CPI fanned fears the Fed may push for a large interest rate hike of as high as 1%” in the upcoming policy meeting late this month to curb inflation, said Yukio Ishizuki, a senior foreign exchange strategist at Daiwa Securities Co.
The Fed’s move would result in a further widening of the interest rate gap between the United States and Japan as the Bank of Japan remains committed to powerful monetary easing and to conducting bond-buying operations to keep interest rates near zero.
The BOJ is expected to maintain ultra-low interest rates at its next meeting, from July 20 to 21, highlighting a growing divergence with a global wave of rate-hiking central banks that has fueled the yen’s slump.
The government is concerned about the yen’s recent sharp falls and will monitor the currency market with even more urgency while working closely with the BOJ, Chief Cabinet Secretary Hirokazu Matsuno said Thursday.
“We are concerned by the yen’s rapid declines seen in the foreign exchange market recently,” the top government spokesperson said, reiterating comments from a number of top policymakers in recent months.
He did not comment on currency interventions.
U.S. Treasury Secretary Janet Yellen, hours after meeting with Finance Minister Shunichi Suzuki on Tuesday, signaled no willingness by the U.S. to support a potential intervention into currency markets to halt the depreciation of the yen against the dollar.
“In general, our view is that countries like Japan, the United States, the G7 countries, should have market-determined exchange rates,” Yellen told reporters Tuesday in Tokyo. “Only in rare and exceptional circumstances is intervention warranted and we did not discuss intervention.”
Yellen met with Suzuki to discuss a range of topics. They issued a joint statement saying Russia’s invasion of Ukraine had raised exchange-rate volatility and pledging “to consult closely on exchange markets and cooperate as appropriate on currency issues.”