The Japanese yen slid to its lowest level in three weeks against the US dollar on Thursday, deepening its losses for the second session in a row, due to concerns about interest rate differentials between Japan and the United States.
The chances of a US interest rate cut receded after the release of the minutes of the Federal Reserve's last monetary policy meeting, awaiting more evidence about those possibilities in the near future.
With the succession of weak economic data in Japan, it is expected that the Japanese Central Bank will maintain its monetary policy tools without any change, most notably Japanese interest rates.
Price overview
Japanese Yen Exchange Rate Today: The dollar rose against the yen by 0.1% to ( 156.90¥) , the highest since May 1, from today’s opening price of ( 155.78¥ ), and recorded its lowest level at ( 156.66¥ ).
The Japanese yen lost 0.4% against the dollar on Tuesday, its fourth daily loss in the past five days, as long-term U.S. yields rebounded.
interest rate differentials
The interest rate differential between the US and Japan is currently stable at around 540 basis points in favour of the US rate. This gap is expected to continue to support the US dollar against the Japanese yen.
This support is likely to continue until the next Fed rate cut, which could come in September, while markets currently rule out the Bank of Japan raising interest rates again this year.
US interest
The minutes of the Federal Reserve's latest monetary policy meeting included several more aggressive comments than expected, reducing the chances of a U.S. interest rate cut in July and September.
The minutes revealed concerns that inflation in the United States may not decline as quickly as hoped, and that some members are open to further interest rate hikes if necessary.
Japanese interest
Weak data on economic growth and service activities in Japan during the first quarter of this year reduced the chances of the Japanese central bank raising Japanese interest rates again this year.
Japanese Yen Performance Forecast
“I think the market is ignoring the risk of a BOJ intervention, but unless there is a major change in the US economic outlook, we don’t think there will be a major change in the FX setup either,” said Vasily Serebryakov, FX strategist at UBS in New York.
“USD/JPY is likely to remain attractive to market participants due to the large interest rate differentials between the US and Japan and healthy risk appetite,” said Commonwealth Bank of Australia currency strategist Carol Kong.
“The risk is that the USD/JPY pair will crawl back up and force the Japanese Ministry of Finance to intervene, but if that doesn’t happen, the dollar is likely to see a period of flat performance,” Kong added.
Artistic view
Dollar vs. Yen Approaches Target – Today’s Forecast 05-23-2024
