Yen rises above 140 per US dollar for first time since 2023, ahead of Fed rate decision
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The yen has soared since hitting a near four-decade low of 161.95 to the US dollar in July, prompting the authorities to intervene in currency markets.
PHOTO: LIANHE ZAOBAO
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TOKYO - The yen strengthened on Sept 16 past the key psychological level of 140 against the US dollar, ahead of a Federal Reserve policy meeting on Sept 18 that is widely expected to see US officials cut interest rates.
The Japanese unit hit 139.96 to the greenback, its strongest level since July 2023, as traders assess the US central bank’s plans for rates, with debate centring on whether it will lower them by 25 or 50 basis points.
Against the Singapore dollar, the yen was trading at 108.1575 at 1.05pm Singapore time, up 0.3 per cent from its Sept 13 close.
The yen has soared since hitting a near four-decade low of 161.95 to the US dollar in July, prompting the authorities to intervene in currency markets. A decision by the Bank of Japan (BOJ) to begin moving away from years of ultra-low rates has also added to the unit’s strength.
The BOJ is also due to deliver its own policy announcement on Sept 20, with most analysts expecting it to hold rates after a surprise hike at the end of July sparked turmoil on markets.
The move led to investors unwinding their so-called carry trades in which they used the cheap currency to buy high yielding assets like stocks.
“A consecutive hike would likely be seen as too aggressive, especially given criticism that the BOJ’s hawkish stance contributed to global market turbulence in early August,” said IG analyst Tony Sycamore.
The yen has been the best-performing Group of 10 currency this quarter, with a 15 per cent gain as investors position for a further narrowing of the interest rate gap between the United States and Japan.
While the BOJ may not change borrowing costs this week, a majority of economists surveyed by Bloomberg see another increase coming in December. The central bank’s hike of its policy rate to 0.25 per cent on July 31 contributed to global markets turmoil in early August that rocked assets from currencies to bonds and stocks.
The central bank will continue to adjust policy going forward, provided the economy performs in line with its projections, board member Junko Nakagawa said in comments on Sept 11.
Many strategists have ditched previous forecasts of yen weakness and predict gains from here. AFP, BLOOMBERG
