Financial News on October 20th: The yen fell below the 1 dollar-150 yen mark for the first time since 1990.
Japan's largest financial institution - Mitsubishi UF Financial Group believes that under the continued strong US dollar expectations, there is a high possibility that the US dollar will break 150 against the Japanese yen in the short term.
Derek, head of global market research at Mitsubishi UF Financial Group Halpenny's team said, "We still believe that the exceeding expectations of inflation data will strengthen the expectation of Fed further sharply hikes in the November and December meetings. Although we believe that core inflation in the United States will peak soon, the Fed needs CPI to decline continuously for at least 2 to 3 months, which means that the Fed may suspend hikes at a meeting in the first quarter of 2023. Such expectations undoubtedly open the door for the continued strengthening of the US dollar."
"Since the Bank of Japan's intervention in the foreign exchange market in September caused the US dollar to break 145.9 on the same day, the US dollar to rise against the Japanese yen, pushing up expectations that the Japanese authorities will intervene again. The Japanese Ministry of Finance has linked the intervention to the 'disordered market'. If the weak yen currently continues, such statements may be quoted by the authorities again. At present, we are still bullish on the US dollar, because the fundamental background of the US dollar determines that the US dollar will continue to rise. Therefore, it is more likely that the US dollar will break above 150 in the short term (US dollar to yen) will break through the new high above 150." Derek Halpenny's team added.
Huatai Securities analyst Chang Huili believes that the Bank of Japan's intervention has also had little effect. The yen has fallen 23% against the dollar this year, the largest depreciation since 1972. If the yen-USD exchange rate remains at its current low or even further depreciates, it is not ruled out that Japan's inflation rate will reach 4%-5% in 2023. Why is
yen so weak?
First of all, the Bank of Japan insisted on the loose monetary policy of exceeding against the trend, especially after May, the interest rate spread of the United States, Japan and other countries continued to widen compared with Japan's , and the direct contact with the yen depreciated rapidly.
In addition, weakening of Japan's fundamentals is also an important reason for the depreciation of the yen, especially the energy crisis, the Japanese trade conditions deteriorate rapidly, the trade deficit expanded, and the yen against a basket of currencies also weakened significantly. What does it mean to depreciate rapidly in
yen?
Unlike intuition, the rapid depreciation of the yen may have little effect on boosting exports - this may be mainly affected by the structure of its export product and economic structure. The sharp depreciation of the currency has increased the inflationary pressure of the country. In August, Japan's CPI hit 3%, the highest since October 2014. At the same time, inflation pressure has shown a trend of full inflation from point to surface.
The Bank of Japan's "reverse" monetary policy may intensify the pressure on the appreciation of the US dollar against the Japanese yen and against a basket of currencies in Asia-Pacific.
The Japanese government bond market is "losing its vitality" - the proportion of the Bank of Japan holding its own government bonds has continued to rise, while the market activity has dropped sharply. Recently, Japan's 10-year treasury bond market has not been sold for several consecutive days, indicating that the market has major doubts about the pricing of treasury bonds.
This article is from the financial industry
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