Yen Approaches declined in Asian trade on Monday, marking its eighth straight loss against the US dollar. This decline brings it to two-month lows following the Bank of Japan’s decision to delay reducing bond purchases until their July meeting.
The Critical 160 Barrier
The Yen is once again nearing the 160 yen per dollar mark, a critical threshold for the Bank of Japan (BOJ). This level is seen as a red line that may prompt another intervention to support the currency. The last time the BOJ intervened at this level, they spent $60 billion in the forex market to prop up the Yen.
Current Market Movements
The Price
The USD/JPY pair rose 0.1% today, reaching 159.93, the highest since April 29, with a session-low at 159.58. The Yen fell 0.55% on Friday against the dollar, marking its seventh consecutive loss, the longest streak since March. Overall, the Yen lost 1.5% last week, the largest weekly drop since early May.
BOJ’s Bond Purchase Plan
At the June meeting, the BOJ maintained its current pace of buying 6 trillion yen a month in Japanese government bonds. The markets had hoped for an announcement of a reduction in these purchases
which did not materialize, leading to further pressure on the Yen.
Bullish Sentiment Amidst Declines
Despite the recent losses, several BOJ policymakers have made bullish remarks, calling for a rate hike to control inflation. This internal debate within the BOJ highlights the complexity of the current economic situation in Japan.
Japanese Authorities and Market Intervention
Analysts believe Japan might intervene directly in the forex market to support the Yen
even if it risks being added to the US forex watch list. Such intervention would be aimed at preventing the currency from breaching the 160 yen per dollar barrier.
The 160 Red Line
The 160 yen per dollar mark has become a crucial level for the BOJ. After spending $60 billion in late April to support the Yen at this level, the BOJ is likely prepared to take similar action if the Yen approaches this threshold again.
Bullish Stance
A collection of opinions from BOJ policymakers following the June meeting suggests that many are in favor of further interest rate hikes to control inflation. This stance could provide some support for the Yen in the medium to long term.
Conclusion
As the Yen continues to decline and approaches the critical 160 yen per dollar level
the market is watching closely for potential intervention by the BOJ. The combination of internal calls for interest rate hikes and the external pressure of market forces creates a complex scenario for Japan’s economic policymakers. Investors should stay alert to upcoming BOJ meetings and announcements
which will likely influence the Yen’s trajectory in the near future.
FAQs
- Why is the 160 yen per dollar level significant? The 160 yen per dollar level is considered a critical threshold by the BOJ, prompting potential market intervention to support the Yen.
- What actions has the BOJ taken to support the Yen in the past? The BOJ spent $60 billion in the forex market in late April to prop up the Yen when it approached the 160 yen per dollar level.
- What are the current sentiments among BOJ policymakers? Several BOJ policymakers are advocating for interest rate hikes to control inflation
despite the recent losses in the Yen. - What is the current state of the Yen against the US dollar? The Yen has experienced its eighth consecutive loss against the US dollar
reaching two-month lows. - Will Japan intervene in the forex market again? Analysts believe Japan might intervene directly in the forex market to support the Yen if it approaches the 160 yen per dollar barrier again.