Yen-Dollar Exchange Rate Falls to 137 Yen at One Point... "Turning Point Approaching for End of Yen Weakness"

137 Yen Range in 2 and a Half Months
Optimism on Fed Rate Hike Slowdown
Domestic Recovery Adds to Exchange Rate Decline Expectations

[Image source=Yonhap News]

[Asia Economy Reporter Lee Ji-eun] Due to the slowdown in U.S. inflation, the yen-to-dollar exchange rate has fallen to the 137-yen level, raising expectations that the prolonged yen depreciation trend, which intensified since April, may come to an end.

On the 15th, the yen reached 137.89 yen per dollar at one point during trading in the Tokyo foreign exchange market. This is the first time in two months since the end of August that the yen-to-dollar exchange rate has been in the 137-yen range.

The reason the yen-dollar exchange rate, which had remained in the 146-yen range on the 10th, sharply declined is due to U.S. economic indicators falling short of market expectations, spreading the view that inflation will slow down, NHK reported. The U.S. Producer Price Index (PPI) released on the 16th rose 8% year-on-year, below the market forecast of 8.3%.

Subsequently, as of 9:44 a.m. on the 16th, the yen-to-dollar exchange rate rose to the 139.19-yen level, showing rapid fluctuations. NHK explained that "news of a large-scale airstrike across Ukraine has led investors to buy back the dollar, a safe-haven asset," causing rapid exchange rate volatility due to geopolitical risks.

As the yen, which had been unable to escape its downward trend, began to rise again, the market is analyzing that the yen depreciation trend has reached its final turning point.

Nomura Securities’ Chief Foreign Exchange Strategist Yujiro Goto said in an interview with major foreign media, "Ahead of the Federal Reserve’s decision on whether to raise the benchmark interest rate in December, the yen-to-dollar exchange rate could rise to 145 yen, but the possibility of exceeding the 150-yen level has decreased." This is because the rise in oil prices, which was cited as a cause for the decrease in Japan’s current account surplus, appears to have peaked, and domestic demand is expected to recover with the resumption of inbound tourism.

Moreover, optimism that the Fed will slow the pace of interest rate hikes is adding to expectations for the yen’s appreciation, according to major foreign media.

However, there is also a view that investors will not easily stop selling the yen unless the Fed halts its giant steps of raising the benchmark interest rate by 0.75 percentage points at a time.

Nomura Research Institute economist Takahide Kiuchi said, "It is premature to declare the end of dollar strength until the Fed begins to shift downward from the four consecutive 0.75 percentage point rate hikes." He added that although the recent yen appreciation trend is clearly visible, investors remain cautious about stopping yen sales.

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