On Wednesday (May 15), the USD/JPY exchange rate fell 1.1% to 154.736 in the US market, then narrowed part of the decline. The yen exchange rate has fluctuated greatly in recent weeks. At the end of April, it fell below 160 for the first time since 1990, then rebounded sharply after two rounds of suspected intervention by the authorities.
(USD/JPY 60-minute trend chart source: eHuitong)
The wide moat between Japan's ultra-low borrowing rates and America's higher borrowing rates has been putting pressure on the yen. On Wednesday, after the release of the US Consumer Price Index (CPI) report for April, the US dollar weakened, US Treasury yields plummeted, and the yen rose accordingly.
After the data was released, traders increased their bets that the Federal Reserve would cut interest rates. Currently, swap pricing indicates that the possibility that the September meeting of the Federal Reserve will cut interest rates by 25 basis points is more than 80%.
Valentin Marinov, head of G10 foreign exchange research and strategy and yen at Credit Agricultural Bank, said that the USD/JPY is the most sensitive to US fixed income market trends so far. If US interest rate investors do cut interest rates early by the Federal Reserve, the USD/JPY exchange rate may fluctuate the most.
According to the data, the so-called core inflation indicator — which excludes volatile food and energy costs — rose 0.3% from March, while core price growth slowed to 3.6% year over year.
The yen fell by about 12% over the past year, making it the worst performing G10 currency. Although the Bank of Japan raised short-term policy interest rates in March this year for the first time since 2007, market sentiment is still sluggish, and bearish bets still dominate the market.
According to reports, in order to contain losses, Japan is suspected to have bought yen twice at the end of April and the beginning of May, spending a total of about 9 trillion yen (57.5 billion US dollars). Masato Kanda (Masato Kanda), the country's top monetary official, declined to comment on whether the authorities interfered.
Monex forex trader Helen Give said, “The CPI definitely gave the Bank of Japan a sigh of relief. However, until the Federal Reserve began cutting interest rates, the strong upper limit of USD/JPY was at the 150 level — the spread is still quite large.”
Market observers believe the yen is still under long-term pressure. Former US Treasury Secretary Lawrence Summers said that monetary intervention was not effective in changing the exchange rate, even if Japan was thought to have taken large-scale intervention measures.
At 00:31 Beijing time on Thursday, USD/JPY was reported at 154.841, a decrease of 0.99%.