Home Forex News Yen slides to near 4-month low, Fed in focus

Yen slides to near 4-month low, Fed in focus


Yen slides to near 4-month low, Fed in focus By Reuters

Breaking News



Published Mar 19, 2024 09:27PM ET
Updated Mar 20, 2024 02:30AM ET

© Reuters. FILE PHOTO: Banknotes of Japanese yen and U.S. dollar are seen in this illustration picture taken September 23, 2022. REUTERS/Florence Lo/File Photo

By Ankur Banerjee

SINGAPORE (Reuters) -The yen languished near a four-month low against the U.S. dollar and a 16-year trough against the euro on Wednesday as traders wagered Japan’s monetary settings will remain accommodative even as the central bank ends its negative interest rate policy.

While the Bank of Japan on Tuesday ushered in the country’s first rate hike in 17 years, the central bank said it expected to maintain accommodative conditions for the time being, keeping pressure on the yen as U.S.-Japanese rate differentials remain stark.

On Wednesday, the yen weakened to a four-month low of 151.58 per dollar and was last off 0.47% at 151.56, with the multi-decade low of 151.94 within sight and the threat of intervention by Japanese authorities resurfacing.

“I think the focus is again around 152 levels,” said Christopher Wong, currency strategist at OCBC, adding that there was a fair chance of seeing some smoothing if dollar/yen continues to go higher towards 152.

Wong said the move for dollar/yen in the near term will be more a function of U.S. rates with the Federal Reserve decision due later on Wednesday.

The yen’s drop was broad based, with the currency weakening to 164.66 against the euro, its lowest since 2008, while against the pound, yen slipped to 192.75, its lowest since 2015. Japan markets are closed on Wednesday for a holiday.

In a historic shift from decades of massive monetary stimulus, the Japanese central bank on Tuesday ended eight years of negative interest rates and other remnants of unorthodox economic policy.

The yen fell 1% against the dollar on Tuesday after the BOJ decision as most investors had already priced in a change, with analysts suggesting that the “dovish hike” cemented the view that the yen carry trade was far from over.

Low Japanese rates have made the yen the funding currency of choice for carry trades, in which traders typically borrow a low-yielding currency to then sell and invest the proceeds in assets denominated in a higher-yielding one.

The Australian dollar touched a more than three-week high on the yen at 98.94, having gained 0.7% overnight.

“The carry trade versus the major currencies continues to be in play and is expected to continue for a while,” Daniela Hathorn, senior market analyst at Capital.com said. “This means the yen is likely to see further weakness, especially if the other central banks continue to delay cutting rates.”


The main spotlight for the day remains on the Fed and although the central bank is not expected to move, its economic projections and comments from Chair Jerome Powell will be in focus.

Last week’s stronger-than-expected inflation reports led traders to further reduce their bets on rate cuts this year, with markets now pricing in 73 basis points (bps) of easing this year. At the start of the year, traders were pricing in 150 bps of cuts.

Traders are pricing in a 59% chance of the Fed starting its easing cycle in June, the CME FedWatch tool showed, sharply lower than earlier expectations.

“Given the recent rebound in inflation, the Fed decision will be closely scrutinised for whether there is a shift downwards in the median dot projection from 3 to 2 cuts this year,” said Nicholas Chia, Asia macro strategist at Standard Chartered (OTC:SCBFF).

“If that happens, I think Powell will try to strike a dovish note in his press conference to prevent a further bear steepening of the US curve.”

The dollar index, which measures the U.S. currency against six rivals, was 0.039% higher at 103.90. The euro last bought $1.0866.

The Aussie was little changed at $0.6528, while the New Zealand dollar eased 0.18% to $0.6042, a day after Australia’s central bank held interest rates steady as expected, while watering down a tightening bias to say that it was not ruling anything in or out on policy.

In cryptocurrencies, bitcoin last fell 3.4% to $61,569, having touched their lowest in two weeks of $60,780 earlier in the session.

Yen slides to near 4-month low, Fed in focus

Our Apps

Terms And Conditions
Privacy Policy
Risk Warning
Do not sell my personal information

© 2007-2024 Fusion Media Limited. All Rights Reserved.

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

Related News