Japanese Yen Falls to Mid-139 Yen per Dollar... Lowest Level in 24 Years

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[Asia Economy Reporter Lee Ji-eun] The U.S. central bank, the Federal Reserve (Fed), indicated its intention to maintain a strong monetary tightening stance until early next year, causing the yen to hit its lowest value in 24 years.

According to Bloomberg on the 31st (local time), the yen exchange rate in the Tokyo foreign exchange market fell 0.4% from the previous day to 139.59 yen per dollar during the session.

Last week, Fed Chair Jerome Powell expressed his intention to raise the benchmark interest rate to around 4% by early next year, but the Bank of Japan (BOJ) maintained its large-scale monetary easing policy, which is analyzed to have led to the decline in the yen's value.

The Nihon Keizai Shimbun reported that Powell's hawkish remarks have raised expectations of a widening U.S.-Japan interest rate gap, triggering yen selling and dollar buying movements. Additionally, the surge in commodity prices due to Russia's invasion of Ukraine, which increased the trade deficit, also appears to have influenced the yen's depreciation.

The yen exchange rate traded in the 115 yen range at the beginning of this year but showed an upward trend after the Fed raised the benchmark interest rate for the first time in three years in March. Subsequently, in April, it surpassed the lowest level recorded in 2015 at 125.86 yen and rose to 139 yen by mid-July. However, in mid-August, as economic indicators worsened and U.S. long-term interest rates fell, the dollar-yen value, which had hovered between 138 and 139 yen, rebounded to around 134 yen.

As a result, some market forecasts predict the yen-dollar exchange rate could rise to 140 yen. Yujiro Goto, a foreign exchange strategist at Nomura Securities, told Nihon Keizai Shimbun, "If the U.S. Consumer Price Index (CPI) in August exceeds market expectations, the yen-dollar exchange rate is expected to rise to the 142 yen range before the September Federal Open Market Committee (FOMC) meeting. Conversely, if economic indicators show weakness, the yen's value is likely to remain in the 136 yen range."

This content was produced with the assistance of AI translation services.