2023-12-30 05:01:00
Sixty percent of analysts expect the yen to outperform the dollar and euro in 2024
In 2023, the yen performed the worst among the G10 currencies. Japan is the only country to maintain negative interest rates, leading the yen to face downward pressure. The yen has underperformed the U.S. dollar, the euro and other G10 currencies, as measured by the Nikkei Trade-Weighted Currency Index.
The Japanese yen exchange rate was trading around 141.40 yen per U.S. dollar on Friday night, down regarding 7% from the end of 2022. The average exchange rate this year is 140 yen, the lowest level since 1990.
The Swiss franc was the strongest performing G10 currency for the second year in a row, followed by the British pound and the euro.
The yield on the benchmark 10-year U.S. Treasury note briefly exceeded 5% in October, its highest level in 16 years. As interest rate differentials between Japan and the United States widened, the yen was close to 152 yen per dollar in November, its lowest level in 33 years.
Market strategists say this is an active period for carry trades in the yen, pushing the dollar higher. In August, the real effective exchange rate of the yen fell to a historic low. The previous low dates back to August 1970, when the yen was still trading at a fixed exchange rate once morest the dollar. This shows that Japan’s purchasing power has declined.
Looking forward to 2024, the Federal Reserve and the European Central Bank are expected to cut interest rates, and the Bank of Japan may end its zero interest rate policy. Most market watchers believe interest rate differentials will narrow and lead to modest appreciation of the yen.
Bank of Japan Governor Kazuo Ueda this week continued to prepare for Japan’s first interest rate hike since 2007, issuing a new round of remarks to further provide reasons for raising interest rates next spring, while not ruling out the possibility of raising interest rates in January next year.
A quick survey of analysts showed that 59% believe the yen will outperform the dollar and euro in 2024. But most forecasts show the yen remains below levels once morest the dollar before the Fed’s rate hike cycle.
Mitsubishi UFJ Morgan Stanley Securities chief currency strategist pointed out that the yen will only strengthen when speculative traders buy back the yen they sold for carry trades when U.S. interest rates are cut.
Editor: Talen, Qingyue
1703957788
#Sixty #percent #analysts #expect #yen #outperform #dollar #euro #providers #FX678
