yen Slides to New Lows as Carry Trade Momentum Builds, Raising Intervention Concerns
TOKYO - The japanese yen is facing renewed depreciation pressure as the prospect of continued ultra-loose monetary policy, reinforced by recent political developments, fuels a resurgence in the yen carry trade. The dollar-yen exchange rate is approaching 155 yen, prompting scrutiny from the ministry of Finance and the Bank of Japan.
The yen’s decline gained traction following the recent presidential election results, which diminished expectations for an imminent Bank of japan interest rate hike. Bank of America revised its year-end dollar-yen forecast from 153 yen to 155 yen,while Deutsche Bank shifted its outlook on the yen from bullish to neutral.
“There is currently no reason to actively buy the yen,” stated Marito Ueda, director of SBI FXTrade. “If there is no strong check from the Ministry of Finance and the Bank of Japan does not send any message regarding interest rate hikes, it woudl not be surprising for the dollar/yen to go as high as 155 yen.”
adding to the pressure, U.S.President Trump, scheduled to visit Japan in October, has repeatedly accused Japan of currency manipulation.In August,U.S. Treasury Secretary Bessent criticized the Bank of Japan for being “behind the curve” in addressing inflation, a rare public rebuke of another contry’s central bank policy.
Market expectations for a Bank of Japan rate hike in October have fallen to around 25%, down from over 60% a week ago, as measured by the overnight index swap (OIS) market.
“A decision to leave the dollar unchanged is likely to lead to further depreciation of the yen,” said Carol Kong, a strategist at the Commonwealth Bank of Australia. The Bank of japan Governor Kazuo Ueda’s presentation of the short-term interest rate outlook will be crucial in determining the yen’s trajectory.
– Coverage cooperation: Masahiro Hidaka, John Cheng and Hidenori Yamanaka
