Source: Finance Association
① Nomura Trading Supervisor expects the exchange rate of the yen to the US dollar to strengthen later this year; ② He believes that the exchange rate of the yen against the US dollar should rise to 140; ③ he said that the strengthening of the yen will be mainly driven by the Federal Reserve's easing of monetary policy and Japan's tightening policy.
In recent times, the Bank of Japan's groundbreaking interest rate hike has failed to drive the yen, and the yen has been overwhelmed by concerns in the market. However, Christopher Willcox, head of trading and investment banking at Nomura Holdings Inc. (Nomura Holdings Inc.), insisted that they expect the yen to strengthen against the US dollar later this year.
In an interview on Thursday, he said, “We think the yen (exchange rate against the US dollar) should rise to 140. The strengthening of the yen will be mainly driven by the Federal Reserve's easing of monetary policy and Japan's tightening policy.”
Willcox joined Nomura Securities in 2021 and led the team to reverse the performance of the trading and investment banking business during one of the most turbulent periods in the company's history. Currently, his department is taking a series of measures to raise revenue, including boosting private credit business in the US and speeding up cost reduction.
Will the Japanese authorities take action?
The yen exchange rate fell to 151.97 yen per dollar on Wednesday, breaking the low of 151.95 recorded in October last year, the lowest level in 34 years. Many market observers believe this level may trigger intervention. As a result, Japanese officials later warned that they might take steps to contain the yen's decline.
According to reports, Japan's Ministry of Finance, the central bank, and the Financial Services Agency held their first tripartite meeting since May last year to this end. After the meeting, Japan's finance minister, Masato Kanda, said that the trend of the yen is receiving close and urgent attention. He pointed out that the yen fluctuated by as much as 4% in the last two weeks, which is no longer a moderate change. Kanda revealed that if the development of the foreign exchange market has an impact on the Japanese economy, the central bank will respond through monetary policy measures.
Steven Englander, head of global G10 foreign exchange research and North American macro strategy at Standard Chartered Bank, said on Thursday that as the yen falls to a decades-long low, Japan is “very, very close” to interfering with the yen.
In a recent interview, he said, “I think we are actually very, very close to them (the Japanese authorities) getting involved... they have discussed the political consequences and no one is sitting there wanting to see the yen depreciate.”
Englander pointed out that potential intervention in the yen is aimed at buying time for the Japanese authorities until the Federal Reserve starts cutting interest rates or the Bank of Japan raises interest rates further. He further noted that the last time the Japanese authorities interfered with the yen in 2022, “the results were quite good,” although investors initially had doubts about the effectiveness of such monetary intervention.
Nomura's Willcox believes that the Japanese authorities are now more inclined to “talk.” He said, “Central banks often intervene when the market is unexpected. We're all talking about it right now, so I think they'd rather talk than act, but apparently you can never predict it.”
editor/tolk