The Japanese yen set a new 34-year low when it fell past the mark of 155 yen per USD, right before the Bank of Japan’s (BOJ) regular monetary policy meeting. The continuous devaluation trend of the yen makes traders feel insecure, it is unclear whether Japanese authorities will intervene in the foreign exchange market or not.
After several days of struggling in a narrow range, the USD suddenly “drowned” the yen below the threshold of 155 yen per USD for the first time since 1990 in the trading session on Wednesday this week. This morning (April 25), the yen to USD exchange rate stabilized around 155.3 yen for 1 USD.
Recently, the market has been rumored that the Japanese Ministry of Finance and BOJ will intervene in the foreign exchange market to prevent the yen from falling below 155 yen/USD. Rumors kept the yen above this psychological exchange rate threshold for a few sessions, but in the end it still could not hold. Many people saw the 155 mark as a limit that forced Tokyo to act.
The above exchange rate milestone appeared in the context of the BOJ launching a meeting lasting two days on Thursday and Friday. The market predicts that the BOJ will keep interest rates unchanged at this meeting. At its March meeting, the BOJ raised interest rates for the first time in 17 years, ending the last remaining negative interest rates in the world.
“We predict that this meeting of the BOJ will make a decision to keep interest rates unchanged, but their statement will lean towards being tough,” analyst Carl Ang of MFS Investment Management commented to Reuters news agency. .
“In terms of policy signals, April still seems a bit early to move away from the message from the March meeting that loose financial conditions will remain for some time. The continued expectation that the BOJ will tighten slowly, combined with low policy interest rates, will make it difficult for the yen to appreciate much even at historic lows.
This week, BOJ Governor Kazuo Ueda said that the BOJ will raise interest rates further if the accelerating inflation trend accelerates toward the 2% target as expected.
“The 155 yen/USD mark is a key psychological threshold after Japanese officials did not intervene at 152,” Monex USA foreign exchange trader Helen Given told Reuters. “Even though Mr. Ueda has repeatedly said the BOJ will not raise interest rates just to protect the yen exchange rate, there is still a possibility that Japan’s monetary authorities will take action to coincide with the BOJ’s Friday meeting.”
Ms. Given said the BOJ would not adjust interest rates on Friday, but “there is a significant possibility that the authorities will intervene in the currency market on the same day to prevent a sharp drop to the 160 yen mark.” 1 USD”.
On Tuesday this week, Japanese Finance Minister Shunichi Suzuki issued his strongest warning ever about the possibility of intervention in the currency market. He said his meeting last week with his American and South Korean counterparts laid the groundwork for Tokyo to take action against the yen’s excessive exchange rate volatility.
For its part, the USD is still holding the “upper hand” in the global currency market. The Dollar Index increased on Wednesday and is firmly in the 105.8-105.9 range, near the 5-month peak of 106 points set this week.
According to data from MarketWatch, the USD has increased in price by nearly 4.4% since the beginning of the year and increased by nearly 1.2% in the past month. This upward momentum is driven by expectations that the US Federal Reserve (Fed) will delay interest rate cuts due to the slowdown in the process of reducing inflation in the US and the economy still maintaining a steady growth rate despite the highest interest rates. 23 years.
