In a relentless slide, the Japanese yen continues to weaken against the US dollar, reaching a new high for the year at 151.85 on Monday, November 13th. This level also marks the yen’s highest point since October 2022.
Driving the recent surge in USD/JPY is the expanding gap between US and Japanese bond yields. Anticipation of sustained high US interest rates into the next year, coupled with the likelihood of Japan maintaining negative interest rates, contributes to the yen’s decline.
Since the beginning of the year, the yen has depreciated by approximately 14% against the US dollar, with the past week alone witnessing a nearly 1.5% surge in USD/JPY. Notably, the yen’s weakness extends beyond the dollar, with EUR/JPY reaching its highest range since August 2008 near the 162.00 level. Similarly, GBP/JPY has been fluctuating above the 180.00 threshold, securing its position in the highest range since November 2015.
Yen Hits Yearly High Against Dollar
Japanese authorities, aware of the situation, are closely monitoring the market. Finance Minister Shunichi Suzuki assured that the government would respond accordingly, although market observers note that mere rhetoric no longer appears to impact the yen significantly.
Commenting on the current state of affairs, Societe Generale strategist Kit Juckes remarked, “We’re in this pause where the dollar has peaked, and the U.S. economy is slowing, but people are going to wait for confirmation.” Geoff Yu, Senior Macro Strategist at BNY Mellon, added, “At the moment, it still depends on the speed of movement (of the yen in the forex market), so if we move at the current pace, then it can still be controlled by Japan.”
Despite the potential risk of Japanese currency intervention, market dynamics remain heavily influenced by the overall dollar environment. Geoff Yu emphasized, “Overall, the dollar environment is driving many things.”
Looking ahead, market participants eagerly await the release of US inflation data. Last week, Federal Reserve officials signaled a commitment to keeping interest rates high, emphasizing that inflation remains too elevated. If the upcoming US inflation data reveals a more significant decline than market expectations, the USD could be at risk of correction.
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