2023-10-31 21:19:03
London (awp/afp) – The yen came close to its lowest level in 33 years on Tuesday, attacked by currency traders disappointed by announcements from the Bank of Japan, which is slow to make its expected monetary turnaround.
Around 8:55 p.m. GMT, the Japanese currency fell 1.71% against the greenback, to 151.72 yen per dollar, a one-year low, not far from the 151.95 reached at the end of October 2022, a first since July 1990.
Against the single currency, the Japanese currency slipped to 160.85 yen, depths not explored in 15 years.
The Bank of Japan (BoJ) left its main key rate unchanged on Tuesday, at -0.1%, as it has done for more than seven years.
At the same time, the BoJ indicated a relaxation of its system of controlling Japanese 10-year bond rates which it considers necessary for the country’s economic growth.
The ceiling on these bond yields, already raised in December and July, to 1% currently, is no more than a “reference”, according to the Bank of Japan, which is now ready to let rates go beyond.
In the process, the rate on ten-year Japanese government bonds jumped to 0.963%, a height it had not seen for 10 years.
In theory, the rise in Japanese bond yields is a factor in supporting the yen, because it favors investments in the Japanese currency.
But “this decision was less aggressive than anticipated by the market and caused the yen to fall,” commented Ipek Ozkardeskaya, analyst at Swissquote Bank.
“Forex traders were a little disappointed by this subtle change in monetary policy,” added Jeffrey Roach of LPL Financial.
“The BoJ refuses to adjust its rate control policy significantly,” reacted Christopher Vecchio of Tastylive. As a result, “the market is challenging the Bank of Japan” to maintain this ultra-accommodating posture.
For the analyst, the institution “will be subject to more political pressure to act, and quickly”.
The October 2022 low pushed the Japanese authorities to intervene in the foreign exchange market to support the yen, which had regained some strength.
“The government does not want to see the yen depreciate further, because that accelerates inflation,” recalls Peter Boockvar, of Bleakley Advisory Group.
The BoJ revised its inflation forecast on Tuesday to 2.8% over one year between April 2023 and March 2024, the fiscal year in Japan, compared to 2.5% so far.
“The Prime Minister (Fumio Kishida) is collapsing in the polls (32% favorable opinions according to a recent Kyodo News survey) and this is partly due to the fact that real wages (once price increases are deducted ) are falling”, eaten away by inflation, argues Christopher Vecchio.
For its part, the BoJ “is still afraid of its shadow”, believes the analyst, with the central bank fearing that monetary tightening will suffocate the Japanese economy, which is still fragile.
Industrial production in Japan shows a decline of 4.6% over one year, according to an indicator published on Tuesday.
“The only possible way to control inflation is to put an end to the ultra-accommodating monetary policy,” retorts Christopher Vecchio.
Tuesday price Monday price 8:55 p.m. GMT 9:00 p.m. GMT EUR/USD 1.0575 1.0615 EUR/JPY 160.43 158.27 EUR/CHF 0.9626 0.9574 EUR/GBP 0.8706 0.8722 USD/JPY 151 .72 149.10 USD/CHF 0.9103 0.9020 GBP/USD 1.2147 1.2170
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