Yen/Dollar Exchange Rate Hits Highest in 4 Years... "Yen Weakening Intensifies Due to Strong Dollar"

Despite Fed's Expected Tightening Policy, Japan Maintains Fiscal Expansion Policy

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Suhwan] The exchange rate of the Japanese yen against the US dollar surpassed 115 yen, marking the yen's lowest value in four years. Following the announcement of Jerome Powell's reappointment as Chairman of the US Federal Reserve (Fed), the dollar strengthened, causing the yen's value against the US dollar to fall to its lowest level since 2017.

As of the morning of the 23rd, the exchange rate stood at 115.09 yen per US dollar.

This is the highest level since 2017.

With the Fed planning to begin tapering (reducing asset purchases) in earnest next year, Japan intends to maintain its fiscal expansion policy. This has led to expectations that the interest rate gap between the US and Japan will widen further.

This has resulted in a decline in the yen's value. Bloomberg reported that the yen has depreciated by about 10% just this year.

Kim Mundy, strategist at the Commonwealth Bank of Australia (CBA), said, "As the yen continues to weaken against the dollar, the exchange rate is expected to reach 120.50 yen before December next year," adding, "With the Fed set to begin tightening policies next year, the widening interest rate gap between the US and Japan will continue to push the yen exchange rate higher."

Paul Mackel, global currency analyst at HSBC, also forecasted, "(With the Fed's tightening policies) if the dollar continues to strengthen, the dollar-yen exchange rate will face upward pressure."

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