Today's session on the foreign exchange market brings considerable volatility on the Japanese yen, which has weakened against the US dollar to levels not seen in 24 years! There are several reasons for such a sell-off of the Japanese currency, but the main driving force is, of course, the disparity in the monetary policy of the FED (hawkish) and the BoJ (dovish).
The currency pair, despite the scale of the increases, has currently failed to break through the psychological barrier of 140, which is considered by many analysts as a trigger point for possible BoJ interventions.
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Open real account TRY DEMO Download mobile app Download mobile appNevertheless, for the moment, the fundamental aspects do not support the yen's quotations, and President Kuroda maintains his willingness to continue loose monetary policy.
The last time Japan supported the currency was during the Asian financial crisis in 1998, when it reached around 146 to the dollar. Prior to that, it intervened at around 130.
Looking ahead to the coming week, the key readings for further quotes will be:
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Today (jobless claims, final PMI for manufacturing and ISM for manufacturing);
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Tomorrow (NFP and durable goods orders).
At the moment, the market is pricing in a 71% chance of a 75 basis point hike at the Fed's next meeting.
Source: Bloomberg
The gap in inflation-adjusted 10-year bond yields between the U.S. and Japan has widened and reached its highest level this year. Such a large gap is a major factor in the weakening of the Japanese yen. Source: Bloomberg
