The yen surged past the key psychological barrier of 140 against the dollar on Monday, continuing its upward trajectory since hitting a nearly 38-year low in July. The Japanese currency appreciated by 0.85%, reaching 139.66—its strongest level since July 2023.
YEN LEADS GROUP-OF-10 CURRENCIES WITH 15% GAIN
The yen has outperformed its peers among Group-of-10 currencies this quarter, marking a 15% gain. Investors are preparing for a potential narrowing of the interest-rate gap between the US and Japan, which has been driving demand for the yen.
FED EXPECTED TO CUT RATES; BOJ HOLDS STEADY
The Federal Reserve is anticipated to lower US interest rates on Wednesday, with uncertainty lingering over the size of the cut. Meanwhile, the Bank of Japan (BOJ) is expected to hold off on any immediate changes, following two rate hikes earlier this year.
CURRENCY MARKETS SHIFT AHEAD OF KEY RATE DECISIONS
Rekindled expectations of a larger-than-expected rate reduction in the US are putting downward pressure on the dollar, with a Bloomberg index tracking the greenback nearing its lowest point since January.
BOJ COMMENTS SUPPORT YEN’S REBOUND
BOJ Governor Kazuo Ueda’s remarks on September 3, affirming the bank’s readiness to lift rates if inflation aligns with forecasts, have further boosted the yen’s recovery. The central bank’s cautious yet firm stance continues to provide momentum for the yen’s appreciation.
STRATEGISTS ADJUST FORECASTS AS YEN OUTLOOK BRIGHTENS
Analysts are increasingly revising their predictions on the yen’s performance, with many now expecting further gains. Richard Franulovich, head of currency strategy at Westpac, projects the dollar-yen rate could stabilize at around 137-138 in the next few months, driven by the divergent monetary policies of the US and Japan.
