Japanese Yen Falls Below 140 Yen per Dollar... Lowest Level in 24 Years

[Image source=Yonhap News]

[Asia Economy Reporter Lee Ji-eun] The value of the yen against the dollar surpassed the 140-yen mark for the first time in 24 years. Recently, there were observations that the selling pressure on the yen had peaked, leading to forecasts that the exchange rate would remain around the 130-yen level until the first quarter of next year. However, due to expectations that the U.S. will continue its aggressive tightening, the yen's value is plummeting.

According to Bloomberg on the 1st (local time), the yen-dollar exchange rate traded at 140.18 yen per dollar during the Tokyo foreign exchange market session. The dollar-yen rate rose to 140.20 at one point in the afternoon, surpassing the previous high of 139.97 set in mid-July. This marked the lowest yen value in 24 years since August 1998.

The yen exchange rate traded in the 115-yen range at the beginning of this year, but after the Fed raised the benchmark interest rate for the first time in three years, it broke through the lowest level recorded in 2015 (125.86) in April. In mid-August, the yen rebounded to around 134 dollars as U.S. long-term Treasury yields fell due to worsening economic indicators.

The yen's value breaking through the psychological barrier of 140 yen was largely influenced by the U.S. August ISM manufacturing index announced that day, which exceeded market expectations. With positive economic data released, the possibility of the Federal Reserve tightening monetary policy more aggressively increased, expanding yen selling and dollar buying. The widening interest rate gap between the U.S. and Japan, as U.S. Treasury yields hit record highs, also encouraged dollar purchases.

Initially, some predicted that the yen-dollar exchange rate would remain around the 130-yen level as the yen showed signs of rebounding in mid-August. Bloomberg, citing its own statistics, stated, "The 'big short' phenomenon, where investors bet on the yen's decline and sell it, has peaked," and forecasted that "the yen-dollar exchange rate will average around 130 yen in the first quarter of next year." However, despite Federal Reserve Chair Jerome Powell's indication last week that the benchmark interest rate could rise to around 4% by early next year, the Bank of Japan (BOJ) continues its large-scale monetary easing policy, exerting strong downward pressure on the Japanese yen.

Experts predict that the dollar-yen exchange rate has significant room to rise beyond the current level. Masafumi Yamamoto, currency strategist at Mizuho Securities Tokyo, told Bloomberg, "As long as the U.S. continues to raise interest rates, the yen could fall further to around 142 yen."

However, it is expected that even if the Japanese government intervenes in the foreign exchange market, the effect will be limited. Yamamoto said, "The rise in the dollar's value is heavily influenced by policy outlooks, so at this point, even if Japanese authorities intervene in the foreign exchange market, it is unlikely to have a significant effect."

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