Wednesday Sep 27 2023 14:03
6 min
The Japanese yen topped the 149 yen per dollar (USD/JPY) mark on Tuesday, reaching its lowest point in eleven months and descending further into levels that may trigger government intervention.
The decline in the currency's value has been substantial this year, primarily due to the Bank of Japan's commitment to maintaining an extremely loose monetary policy, even as other major central banks — such as the U.S. Federal Reserve and the European Central Bank — have pursued aggressive tightening measures. During its September meeting, the Bank of Japan (BoJ) disappointed hopes of signaling an end to its negative interest rate policy by maintaining a dovish stance.
The yen's ongoing weakness has led Japan's finance ministry to increase warnings regarding the possibility of currency intervention in recent weeks.
Simultaneously, data has revealed that the country's headline inflation rate moderated to 3.2% in August from 3.3% in July, although the core inflation rate has remained above the BoJ's 2% target for the seventeenth consecutive month.
In an overview on Wednesday, Markets.com Chief Market Analyst Neil Wilson wrote that the BoJ may soon change its monetary policy stance, given the yen’s decline:
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In a comment cited by FXStreet, analysts at MUFG Bank echoed similar sentiments to Wilson, adding that intervention was likely above the 150 mark:
In their forecast for the Japanese yen, analysts at Melbourne-headquartered ANZ Bank echoed their colleagues at MUFG, saying that the BoJ could step in to influence currency markets if the dollar to yen rate breached 150:
Analysts at Societe Generale were more muted, agreeing that dollar strength may provoke BoJ intervention:
In their latest FX Snapshot on September 25, analysts at Citibank Hong Kong were fairly optimistic in their USD to yen forecast:
Citi’s 3-month USD to yen forecast saw the pair averaging 148.00. The bank’s 6-to-12-month forecast saw renewed strength for JPY, suggesting that a potential unwinding of the Fed’s monetary policy may send the USDJPY rate to an average of 130.00.
The bank's long-term USDJPY projection was identical to its 6-12 month forecast, as it saw the pair maintain at the 130.00 level going forward.
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