Summary:
Tuesday saw the yen battered and near a 30-year low against the dollar, contrasting sharply with higher long-term rates elsewhere due to the BOJ's QE.
The battered yen was stuck near a three-decade low against the dollar on Tuesday as the BOJ’s QE contrasted sharply with the prospect of higher-for-longer rates elsewhere.
Similarly, the currency slid to a 15-year low against the euro and three-month low against the pound in early Asia trade, extending its loss from the high it hit in 3 Oct.
The BOJ tweaked its YCC policy as expected and implied an end to negative interest rates earlier this month, but the move failed to boost the yen amid the backdrop of rising yields and strong dollar.
Japanese authorities intervened in the currency market last year after the yen eyed the 150 level, the first time since 1998. Markets suspect that officials may have acted overtly this time.
Fed officials have recently pushed back against expectations that hiking cycle was over, which kept the dollar bid. The first important inflation data after the Fed’s meeting will be closely watched.
Japanese Finance Minister Shunichi Suzuki said on Tuesday that the government would take all possible stEPS necessary to respond to currency moves – an old chestnut.
The yen is at a crossroads near the significant 152 mark. A double top formation could lead to another pullback below 150, otherwise an elongated downward trajectory will be inevitable.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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