(BFM Bourse) – The Japanese currency is suffering from rate hike expectations from the Federal Reserve (Fed). The dollar thus crossed the bar of 140 yen for 1 dollar.
The yen cannot withstand the strength of the greenback. The Japanese currency plunged Thursday to hit a 24-year low once morest the dollar, which was taking advantage of its status as a safe haven in a worried market, also jumping once morest theeuro and the pound.
The Japanese currency, which is also suffering from the ultra-accommodating policy of its central bank, lost 0.73% to 140 yen, around 2:45 p.m. GMT (4:45 p.m. in Paris). The plunge in the yen, which has melted by more than 20% over the past year, is attributed by currency traders to Japanese monetary policy, which remains very flexible.
A change in the BoJ’s posture?
Unlike the United States and Europe, where inflation is soaring and has even exceeded 10% in the United Kingdom, inflation in Japan reached 2.4% year on year in July, quite close to the target 2% of the major central banks, encouraging the Bank of Japan (BoJ) to wait.
But the melting of the yen might push the institution to act: “Previously, when the Bank of Japan intervened to buy yen, it was around these levels”, explained to AFP David Forrester, in charge of the exchanges of the Agricultural credit in Hong Kong.
“Inflation in Japan is accelerating and spreading to sectors other than food and energy”, two causes of price increases linked to the war in Ukraine and over which central banks have little power, notes M Forrester. This more general price increase should “push the BoJ to change its posture a bit”, he believes.
Other major currencies also weaken
The Bank of Japan’s wait-and-see attitude contrasts with the firm line of the American central bank (Fed), which has repeatedly indicated that its rate hikes will continue to curb inflation. And the markets were also worried regarding seeing the Chinese economy weaken, which is pushing investors towards the dollar, a safe haven.
Chinese manufacturing activity collapsed in August, according to an independent index, and the country continues to follow a strict zero Covid strategy despite having a much lower number of contaminations than the rest of the world.
The other major currencies were no better on Thursday once morest the dollar: theeuro lost 1.25% to 0.9928 dollar, falling back below the parity threshold with the greenback, while the British pound lost 0.95% to 1.1511 dollar, evolving at a level not seen since March 2020. The pound is dangerously approaching $1.1412, a threshold below which the British currency will be at its lowest since 1985.
(With AFP)
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