The Bank of Japan's Rate Hike Fails to Halt Yen's Decline, Approaching a 40-Year Low

BlockBeats News, June 19th, according to Reuters, despite the Bank of Japan raising interest rates to the highest level in 31 years last week and the Japanese Ministry of Finance intervening in the foreign exchange market multiple times this year, the yen against the dollar still hovers near a nearly 40-year low. On Friday, the dollar against the yen was at 161.12, not far from the two-year high touched earlier.

The newly appointed Federal Reserve Chair, Kevin Warsh, hawkish stance continues to push up the dollar, while Japan's core inflation has been below the Bank of Japan's 2% target for the fourth consecutive month, weakening market expectations of further rate hikes. At the same time, Japanese Prime Minister Taro Aso's fiscal spending plan has also raised concerns in the market about the fiscal situation.

DBS Bank stated that after the Bank of Japan raised interest rates this week, short yen positions in the market have not been significantly covered, and Japan's tolerance for yen depreciation has almost reached its limit. The market expects that when the dollar against the yen approaches the 161.95 level, the Japanese Ministry of Finance may intervene in the exchange rate again. Meanwhile, CME FedWatch data shows that the probability of a 25 basis points rate hike by the Fed in July has risen to 38.5%, a significant increase from 8% a week ago, further strengthening expectations of a strong dollar.