(BFM Bourse) – The yen has been trading at lows for twenty years against the dollar – and seven years against the euro – due to the growing gap between the still ultra-accommodating monetary policy of the Bank of Japan and the tightening of the posture of the US Federal Reserve. The Japanese currency has lost 14% since the start of the year against the greenback.
The yen continued its decline against the dollar and other major currencies on Wednesday, the governor of the Bank of Japan having once again defended his ultra-flexible monetary policy by judging a “stable weakness” of the national currency desirable. The yen plunged against the dollar to 133.88 yen, a new low since 2002, and to 143.65 yen against the single currency, a level not seen since January 2015.
Even though inflation remains relatively low in Japan (2.1% excluding fresh produce in April), the currency’s fall of 14% since the start of the year against the dollar is beginning to worry some observers. But the governor of the Bank of Japan (BoJ), Haruhiko Kuroda, again affirmed Wednesday before the Japanese Parliament that a “stable weakness” of the yen would benefit the national economy, turned towards exports, even if he recognized that too rapid a dive was not desirable.
A change of direction not possible
The governor of the Japanese central bank reiterated his desire not to change course on monetary policy and this is “the third day in a row where he says that it is crucial that Japan stays on the same line”, underlined Derek Halpenny, analyst at MUFG.
“It’s a lackluster session as investors await the big macro events at the end of the week, the European Central Bank (ECB) meeting on Thursday and the CPI inflation index in the US on Friday” , explains Henry Allen, an analyst at Deutsche Bank.
Observers expect the ECB to signal an end to negative rates in the coming months, and want to know if its chair Christine Lagarde will give any hints as to how big the hike is to come. “If Ms. Lagarde remains cautious and signals a rise of just 0.25 percentage points next month, the euro could continue to languish,” warns Han Tan, an analyst at Exinity.
Against the Canadian dollar, which is benefiting from high oil prices of which the country is a major producer, the euro was trading for $1.35 after falling to $1.3390, its lowest since April 2015. “The dollar Canadian also benefits from a favorable monetary context as the Bank of Canada has just operated in June a second consecutive rate hike of 50 basis points (0.50 percentage point, editor’s note) to bring back its main interest rate at its highest level since January 2020 at 1.5%”, adds Guillaume Dejean, analyst at Western Union.
(With AFP)
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