Source: Wall Street News
The sharp decline in the yen gradually subsided, but the Japanese authorities and the bears continued to mediate.
On Tuesday local time, a senior Japanese official, Masato Kanda, said in a speech that Japan may have to take action against disorderly and speculative foreign exchange fluctuations.
Masato Kanda, Japan's Deputy Minister of Finance and Deputy Minister of International Affairs, said:
Ideally, the exchange rate can reflect changes in fundamental factors in a stable manner. If the market operates properly and follows fundamentals, then of course there is no need for the government to intervene.
However, when excessive fluctuations or disorderly fluctuations due to speculation occur, the market cannot function properly, and the government may have to take appropriate action. We will continue to take the same firm approach as before.
Wall Street newsThe previous article mentioned that the Japanese authorities interfered in the foreign exchange market at least twice last week, costing more than 9 trillion yen, driving the yen to rebound. The exchange rate of the yen against the US dollar rose from a record low of 160.245 in 34 years to a high of 151.86 yen per month.
Kanda Masato did not comment on US Treasury Secretary Yellen's remarks. Earlier, Yellen called for careful intervention by the Japanese authorities, leading to a weakening of the yen. Investors expect the yen to face continued pressure due to the huge interest spread between the US and Japan.
At noon trading in Asia on Tuesday, the yen traded around 154.50 yen against the US dollar. The cumulative decline so far this year is close to 9%.
Hideo Kumano, chief economist at Dai-ichi Life Research Institute, said that given Japan's limited cash reserves in dollars, and Yellen said that such measures are only acceptable in rare cases, Japan is unwilling to interfere in the foreign exchange market.
Kumano stated:
Kanda may have started issuing verbal warnings long ago, as he hopes to fix the yen exchange rate at a low level of around 150 against the US dollar until at least the US (April) CPI data is released on May 15.
However, investment bank analysts such as the Royal Bank of Canada Capital Markets and Bank of America all expect that huge interest spreads and trade deficits between the US and Japan will continue to put downward pressure on the yen, and the exchange rate of the yen may fall back to 160 against the US dollar.
It is worth mentioning that the Bank of Japan last interfered in the foreign exchange market and promoted the steady strengthening of the exchange rate of the yen against the US dollar. However, Marito Ueda, head of SBI's Liquidity Markets market research department, said this time it might be more difficult.
At the time, some people speculated that the US interest rate hike cycle was coming to an end, and the outlook for monetary policy was more clear than it is now.
The Bank of America expects the Federal Reserve to cut interest rates in December. Shusuke Yamada, head of Japanese currency and interest rate strategy at the agency's Japan branch, said:
Considering that there may be no signs of interest rate cuts around September, the weakening pressure on the yen will continue for more than a quarter.
Editor/jayden