Mar 20 2024: The yen hovered near a four-month low against the U.S. dollar and a 16-year low against the euro on Wednesday, with traders anticipating that Japan’s monetary policies will remain supportive despite the Bank of Japan’s (BOJ) decision to end its negative interest rate policy.
Following the BOJ’s announcement of Japan’s first rate hike in 17 years, the central bank indicated its intention to maintain accommodative conditions, keeping pressure on the yen due to significant U.S.-Japanese rate differentials.
On Wednesday, the yen weakened to a four-month low of 151.58 against the dollar and was last down 0.47% at 151.56, nearing the multi-decade low of 151.94, which could prompt intervention from Japanese authorities.
Christopher Wong, a currency strategist at OCBC, noted that attention was focused on the 152 levels for the dollar/yen pair, suggesting the possibility of intervention if the pair continues to rise.
The yen’s decline extended broadly, with it weakening to 164.66 against the euro, its lowest level since 2008, and slipping to 192.75 against the pound, its lowest since 2015. Japanese markets were closed on Wednesday for a holiday.
The BOJ’s shift away from extensive monetary stimulus resulted in a 1% drop in the yen against the dollar on Tuesday, reinforcing the view that the yen carry trade remained active.
The Australian dollar strengthened against the yen, reaching a more than three-week high at 98.94, reflecting ongoing carry trade dynamics.
Market focus remained on the Federal Reserve’s decision later in the day, with expectations of no immediate policy changes but keen interest in economic projections and comments from Chair Jerome Powell.
Traders adjusted their expectations for rate cuts following stronger-than-expected inflation reports, with markets now pricing in 73 basis points of easing this year, down from 150 bps at the start of the year.
The dollar index, measuring the U.S. currency against six counterparts, showed a slight increase at 103.90. The euro was at $1.0866, the Aussie dollar at $0.6528, and the New Zealand dollar at $0.6042.
In the cryptocurrency market, bitcoin fell 3.4% to $61,569, hitting a two-week low of $60,780 earlier in the session
