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14-06-2022, 07:18 AM
June 13, 2022
3:34 PM GMT+8
Last Updated 15 hours ago
By Saikat Chatterjee
LONDON, June 13 (Reuters) - The Japanese yen fell past the psychological 135 line to levels against the U.S. dollar last seen in October 1998.
The scale of the move has repercussions for the domestic economy as yen-based import prices are surging at a record annual pace, heaping pressure on household balance sheets.
The Bank of Japan and the Japanese government on Friday gave a rare joint statement that they may intervene if weakness persists.
......
WHY IS THE YEN WEAK?
The yen, the third most-traded currency globally, fell as low as 135.22 yen after starting 2022 at 115. With the dollar up more than 16% so far this year, the yen is on track for its biggest annual drop since 2013.
The weakness primarily stems from widening interest rate differentials between Japan and elsewhere.
While the rest of the world, led by the U.S. Federal Reserve, is raising rates aggressively to tame soaring inflation, the BOJ has doubled down on its easy policy stance.
......
WHAT CAN STOP THE DECLINE?
A marked improvement in growth prospects as the country reopens its borders post-COVID and higher inflation could alter the BOJ's dovish stance.
Japan's core consumer prices in April were 2.1% higher than a year earlier, exceeding the BOJ's 2% inflation target for the first time in seven years.
......
DOES A WEAKER YEN BOOST THE ECONOMY?
The yen has weakened back towards recent 7-year lows versus the Chinese yuan and is hitting new multi-year lows against the Korean won and the Taiwanese dollar, which should provide some relief for Japan's widening trade deficit.
......
The yen's decline also boosts the attractiveness of its stock market among foreign investors who consider it undervalued versus European and U.S. markets.
......
The yen's weakness puts Japanese investors in a bind.
Yields are high and rising, which makes foreign bonds much more attractive. But that also means the cost of FX hedging is climbing.
So Japanese investors can often only capture the higher yields if they buy foreign bonds unhedged.
But with the yen at such depressed levels it is difficult for investors to stomach such currency risk, such as the yen appreciating. Even a modest move back to 115-120, where we were 4 months ago, would eat up years worth of yield advantage.
https://www.reuters.com/markets/europe/w...022-06-10/
3:34 PM GMT+8
Last Updated 15 hours ago
By Saikat Chatterjee
LONDON, June 13 (Reuters) - The Japanese yen fell past the psychological 135 line to levels against the U.S. dollar last seen in October 1998.
The scale of the move has repercussions for the domestic economy as yen-based import prices are surging at a record annual pace, heaping pressure on household balance sheets.
The Bank of Japan and the Japanese government on Friday gave a rare joint statement that they may intervene if weakness persists.
......
WHY IS THE YEN WEAK?
The yen, the third most-traded currency globally, fell as low as 135.22 yen after starting 2022 at 115. With the dollar up more than 16% so far this year, the yen is on track for its biggest annual drop since 2013.
The weakness primarily stems from widening interest rate differentials between Japan and elsewhere.
While the rest of the world, led by the U.S. Federal Reserve, is raising rates aggressively to tame soaring inflation, the BOJ has doubled down on its easy policy stance.
......
WHAT CAN STOP THE DECLINE?
A marked improvement in growth prospects as the country reopens its borders post-COVID and higher inflation could alter the BOJ's dovish stance.
Japan's core consumer prices in April were 2.1% higher than a year earlier, exceeding the BOJ's 2% inflation target for the first time in seven years.
......
DOES A WEAKER YEN BOOST THE ECONOMY?
The yen has weakened back towards recent 7-year lows versus the Chinese yuan and is hitting new multi-year lows against the Korean won and the Taiwanese dollar, which should provide some relief for Japan's widening trade deficit.
......
The yen's decline also boosts the attractiveness of its stock market among foreign investors who consider it undervalued versus European and U.S. markets.
......
The yen's weakness puts Japanese investors in a bind.
Yields are high and rising, which makes foreign bonds much more attractive. But that also means the cost of FX hedging is climbing.
So Japanese investors can often only capture the higher yields if they buy foreign bonds unhedged.
But with the yen at such depressed levels it is difficult for investors to stomach such currency risk, such as the yen appreciating. Even a modest move back to 115-120, where we were 4 months ago, would eat up years worth of yield advantage.
https://www.reuters.com/markets/europe/w...022-06-10/
