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The yen hit a 34-year low. Officials spoke out after an emergency meeting: they are "paying close attention" to exchange rate trends.

2024-03-28

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On the 27th, the Japanese yen exchange rate once fell to 151.97 yen per US dollar, refreshing the low of 151.95 recorded in October last year and setting a 34-year low.

Since the beginning of the year, the yen has fallen by more than 7% against the US dollar, and is set to record its fourth consecutive depreciation this year, increasing market bets on government intervention measures.

On the 27th, Japanese Finance Minister Shunichi Suzuki warned that after the yen fell, the Japanese government is paying close attention to market trends with a high sense of urgency and will take bold action on exchange rate issues if necessary. According to media reports, Japan’s Ministry of Finance, Central Bank and Financial Services Agency held an emergency meeting for this purpose.

After the meeting, Masato Kanda, financial officer of the Ministry of Finance of Japan, said that the trend of the yen is receiving close and urgent attention. He pointed out that the yen has fluctuated as much as 4% in the past two weeks, which is no longer a mild change. Kanda revealed that if developments in the foreign exchange market have an impact on the Japanese economy, the central bank will respond through monetary policy measures.

Analysts believe that Suzuki's remarks and the trend of the yen have indicated that future intervention is more likely. "Intervention is more likely, with another sharp move higher in USD/JPY likely to be a catalyst in the near term," Commonwealth Bank of Australia wrote in a note.

Bank of America Global Research reports that intervention is indeed a pragmatic option, but it may not resolve long-term concerns, "As the yen's decline is a combination of structural capital outflows and a widening of the U.S.-Japan interest rate differential, it is not just caused by speculation." , therefore, foreign exchange intervention cannot fundamentally solve the problem."

Last week, the Bank of Japan lifted its large-scale monetary easing policies, including negative interest rates and YCC. Although this is already a "historic step," the degree of tightening is far from comparable to that of the Federal Reserve, which has raised interest rates by a cumulative 525 basis points. On the day of the resolution, President Kazuo Ueda also stated that the bank would maintain a loose monetary environment.

Generally speaking, currencies with higher interest rates are easier to buy, while currencies with lower interest rates are easier to sell. The "carry trade" of raising funds in low-interest-rate yen and buying high-interest-rate currencies is causing the yen to depreciate.

Quincy Krosby, chief global strategist at LPL Financial, said that the Japanese government has long been worried about hedge funds using the yen for arbitrage trading. They usually issue verbal warnings, telling the market that "we may step in and frustrate your ambitions in the currency market."

At present, most traders believe that 152 yen per dollar may be the trigger point for Japanese authorities to intervene in the market.

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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The yen hit a 34-year low. Officials spoke out after an emergency meeting: they are "paying close attention" to exchange rate trends.

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