Japanese Yen At 24-Year Low Against US Dollar: What You Need To Know

Japanese currency markets are in a new state of tumult as the yen hit a 24-year low against the U.S dollar.

What Happened: The Japan Times reported the nation’s currency fell to the ¥139 level, its lowest level against the dollar since September 1998. The decline was attributed to problems across the Pacific: the unexpectedly high 9.1% year-over-year spike in U.S. inflation and the growing belief the U.S. Federal Reserve will enact a more aggressive rate hike regimen.

“The strong CPI fanned fears the Fed may push for a large interest rate hike of as high as 1%” in the upcoming policy meeting late this month to curb inflation, said Yukio Ishizuki, a senior foreign exchange strategist at Daiwa Securities Co., in an interview with the Japan Times.

Unlike the Federal Reserve, the Japanese central bank — the Bank of Japan (BOJ) — is taking the opposite approach with a monetary easing policy designed to keep interest rates near zero. The next BOJ meeting, scheduled for July 20-21, is expected to stay on that course.

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What Happens Next: However, the Japanese government does not necessarily share the BOJ’s view that near-zero interest rates will cushion the country's economy.

“We are concerned by the yen’s rapid declines seen in the foreign exchange market recently,” said Chief Cabinet Secretary Hirokazu Matsuno.

U.S. Treasury Secretary Janet Yellen met with Finance Minister Shunichi Suzuki on Tuesday and stated she was not supporting the potential for government intervention into currency markets in order to strengthen the yen against the dollar.

“In general, our view is that countries like Japan, the United States, the G7 countries, should have market-determined exchange rates,” said Yellen at a press conference. “Only in rare and exceptional circumstances is intervention warranted and we did not discuss intervention.”

Photo: Wikimedia Commons

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