Ogurita: Japanese government and Japanese banks ( Central Bank ) were forced to implement exchange rate intervention after 23 years of buying and selling US dollars, but the depreciation trend of the yen against the US dollar after the spring has not reversed. Surprisingly, there have been remarks in the United States that are vigilant about the appreciation of the US dollar, and the market atmosphere has begun to undergo subtle changes. The reason seems to be that the US dollar continues to appreciate in a sense of incongruity against the backdrop of the intensified decline of US stocks and bonds.
In the market, the situation of US stocks and bonds falling together and the appreciation of the US dollar has become obvious after the summer. "We must stick to the end before we reach our goal," said Powell, chairman of the U.S. Federal Reserve (FRB), in August, stressed the attitude of maintaining rate hikes before curbing inflation. Taking this as an opportunity, long-term interest rates in the United States accelerated (bond prices fell). The depreciation of the yen against the US dollar caused by the widening interest rate gap between Japan and the United States has rapidly strengthened.
At the same time, the US stock market, which had previously continued to rise, stepped on a sudden brake, and the Dow Jones 30 industrial stock average index fell below 29,000 points for the first time in about two years as of the end of September. The reason why the US dollar appreciates while the US stock market and bonds fell together is that the market is aware of the risk of a US recession caused by excessive interest rate hikes. The asset prices in the United States are falling, and the sense of inconsistency of the continued appreciation of the currency dollar is becoming increasingly difficult to ignore.
"Empirically, for market participants, inflation usually leads to currency depreciation." Yukiji Fukatani, a Japanese market risk advisory firm, was previously at the forefront of foreign exchange trading among large financial institutions at home and abroad. He pointed out that "in the final analysis, the depreciation of the yen against the US dollar caused by the widening interest rate spread is limited to the situation where trust in the US economic prosperity is maintained." As the risk of a recession in the U.S. economy is aware, it will become difficult to maintain a buyer in the dollar.
In addition, speculative funds such as hedge fund , which previously led the purchase of US dollars, will determine the basic strategy for next year before the end of 2022. Since the spring, the US dollar has appreciated by 30 yen against the yen. Fukatani said, "Even if the US dollar is further bought, the exchange rate will be limited. The strategy of buying the US dollar has to be revised." In 2023, as demand for foreign tourists visiting Japan recovers, the operation of buying yen and selling US dollars is likely to increase, which will make up for the supply and demand level of Japanese yen and buying US dollars caused by the trade deficit of Japan .
In terms of predicting the prospects of the exchange rate market, the focus is on how much the decline of the US economy has reached after a sharp interest rate hike. Nomura Securities predicts that the US economy has entered a recession from October to December this year, and it is likely to maintain a slow recession throughout 2023. Nomura Securities chief economist Kyohei Morita believes that "before the end of the US interest rate hike, the market will maintain its current appreciation level of the US dollar, but next year it will move towards 1 dollar against 130 yen, and selling the US dollar will gradually gain an advantage."
Hyatsui Tang from Ruisui Bank is also skeptical of the rapid shift to the depreciation of the US dollar, emphasizing that from the perspective of the US government and Feder , at least before the inflationary pressure is reduced, "the situation of benefiting from the appreciation of the US dollar will continue compared to the troubles of the appreciation of the US dollar." He believes that as long as there is no situation of concerns about the outflow of funds in emerging market countries causing the currency crisis, the attitude of tolerating the appreciation of the US dollar will not change.
USD (REUTERS)
Even when the US economy is in a recession, the market still finds it difficult to remember the US dollar's plunge, which is to a certain extent because the credit of the Japanese yen, which was previously regarded as a safe-haven currency, is shaken. Tang Jian said, "Even if the US dollar is sold out in large quantities, there are questions about how much capital flows into the yen."In Japan, where the trade deficit has become normalized, it may have entered an era where economic policies and corporate strategies should not always be considered as before, as it did before, but should adopt economic policies and corporate strategies based on the "tone of depreciation of the yen" such as pushing inbound tourists and returning to the domestic market.
