Yen Moves in has been on a downward trajectory in Asian trade on Monday, falling against a basket of major currencies. This marks the third consecutive session of declines against the dollar, with the Yen approaching six-week lows. The recent policy meeting of the Bank of Japan (BOJ) and rising US 10-year treasury yields are key factors contributing to this trend.
The Current Price Movement
USD/JPY Pair Performance
The USD/JPY pair increased by 0.2% today, reaching 157.66 yen per dollar, with a session-low at 157.27. This follows a 0.25% decline on Friday, which saw the Yen hitting six-week lows at 158.26. Over the past week, the Yen lost 0.45% against the dollar due to concerns over the Japan-US interest rate gap.
Recent Trends
The Yen’s decline is driven by several factors, including the recent BOJ policy meeting and rising US treasury yields. These elements are creating a challenging environment for the Yen as it struggles to maintain its value against the dollar.
Bank of Japan’s Policy Decisions
Interest Rates and Monetary Policy
As anticipated, the BOJ voted to maintain interest rates at 0.1% and kept its monetary policies unchanged. This decision came after the BOJ had raised short-term interest rates by 20 basis points to 0.10% in March, marking the first rate hike since 2007.
Bond Purchases Program
In a surprising move, the BOJ decided to continue purchasing government bonds at a pace of 6 trillion yen ($38 billion) per month. Markets had heavily expected the BOJ to announce a reduction in its massive bond purchases program this month. However, the BOJ indicated that it would consider reducing purchases at the July meeting. This decision has added to the Yen’s pressure as it indicates a continuation of the current accommodative monetary policy.
Market Expectations
Nearly two-thirds of economists polled by Reuters had expected the BOJ to start reducing its monthly bond purchases this month. The BOJ’s decision to maintain its current policy stance, while other central banks have moved towards tightening monetary policies and combating inflation, has further widened the interest rate gap between Japan and other major economies.
Impact of US Treasury Yields
Yield Performance
US 10-year treasury yields rose by 0.6% on Monday, moving away from ten-week lows at 4.190%. This rise in yields supports the dollar, making it more attractive compared to the Yen.
Federal Reserve’s Influence
Statements from Federal Reserve officials, such as Minneapolis Fed Chair Neil Kashkari, suggesting a single interest rate cut likely in December, have influenced market expectations. The potential for sustained high yields in the US further undermines the Yen’s value against the dollar.
Conclusion
The Yen’s recent decline is influenced by the BOJ’s decision to maintain its current monetary policies and the rise in US treasury yields. As the BOJ continues its accommodative stance and the interest rate gap between Japan and other major economies widens, the Yen remains under significant pressure. Investors will be closely watching the BOJ’s future decisions and US economic data to gauge the Yen’s path forward.
FAQs
Why is the Yen declining against the dollar?
The Yen is declining against the dollar due to the Bank of Japan’s decision to maintain its current monetary policies, including bond purchases, and the rising US treasury yields, which make the dollar more attractive.
What are the current performance levels of the USD/JPY pair?
The USD/JPY pair rose by 0.2% today to 157.66 yen per dollar, with a session-low at 157.27. The Yen has been on a downward trend, hitting six-week lows at 158.26 last Friday.
What was the outcome of the recent BOJ policy meeting?
The BOJ decided to maintain interest rates at 0.1% and continue purchasing government bonds at a pace of 6 trillion Yen Moves in per month. The BOJ indicated it might consider reducing purchases at the July meeting.
How do US treasury yields affect the Yen?
Rising US treasury yields increase the attractiveness of the dollar, as higher yields offer better returns for investors. This weakens the Yen Moves in as it becomes less appealing compared to the dollar.
What are the expectations for future BOJ policy decisions?
While the BOJ has maintained its current policies, nearly two-thirds of economists expected it to start reducing bond purchases this month. The BOJ has suggested it may consider such reductions at the July meeting, but the timing and extent remain uncertain.