He Japanese yen (JPY) fell to its weakest level since 1990 against the US dollar on Wednesday, with USD/JPY touching 160.40 during European trading hours.
On April 29, the Bank of Japan (BoJ) intervened in the foreign exchange (FX) market and caused a sharp drop in USD/JPY after the pair reached 160.20. At press time, USD/JPY is trading a few pips above this level.
Japan’s Finance Minister Shunichi Suzuki repeated earlier in the week that they will continue to take appropriate measures to respond to the currency depreciation. Meanwhile, Japan’s Chief Cabinet Secretary Yoshimasa Hayashi said on Monday that excessive volatility in currency markets is undesirable, adding that they will closely monitor FX movements and take necessary action if necessary.
The Japanese Yen FAQs
The Japanese Yen (JPY) is one of the most traded currencies in the world. Its value is determined broadly by the performance of the Japanese economy, but more specifically by the policy of the Bank of Japan, the differential between the yields of Japanese and US bonds or the risk sentiment among traders, among other factors.
One of the mandates of the Bank of Japan is currency control, so its movements are key for the Yen. The BoJ has intervened directly in currency markets on occasion, usually to lower the value of the Yen, although it often refrains from doing so due to the political concerns of its major trading partners. The BoJ’s current ultra-loose monetary policy, based on massive stimulus to the economy, has caused the depreciation of the Yen against its main currency pairs. This process has been exacerbated more recently by a growing policy divergence between the Bank of Japan and other major central banks, which have opted to sharply raise interest rates to combat decades-old levels of inflation.
The Bank of Japan’s ultra-loose monetary policy stance has led to increased policy divergence with other central banks, particularly the US Federal Reserve. This favors the widening of the spread between US and Japanese 10-year bonds, which favors the Dollar against the Yen.
The Japanese Yen is often considered a safe haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. In turbulent times, the Yen is likely to appreciate against other currencies that are considered riskier to invest in.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
