The yen falls to its lowest level against the dollar in 20 years

Posted 13 April, 2022

The yen fell Wednesday to its lowest level in 20 years against the dollar, weighed down by the growing gap between Japan's ultra-accommodating monetary policy and the tightening of that of the Fed in the face of US inflation.

A dollar traded for 126.15 yen around 06:30 GMT, having briskly crossed the 125.86 yen mark a few minutes earlier, a first since 2002.

The yen has been on a declining slope against the dollar since early 2021, from when US Treasury yields rose sharply amid the sharp rebound in US growth and the start of the acceleration of inflation in the country.

The Japanese currency had already lost 10% of its value against the greenback last year and has dropped more than 8% since the start of this year.

The weakness of the Japanese currency increased further when the US Federal Reserve (Fed) began to tighten its monetary policy to counter rising inflation in the United States.

Because contrary to the trend of the other major central banks, the Bank of Japan (BoJ) maintains its ultra-accommodating monetary policy, considering that the macroeconomic conditions are still not met in Japan to tighten it.

Soaring energy and other commodity prices, which have intensified since the outbreak of war in Ukraine in late February, have further accelerated the yen's slide since last month.

The yen is traditionally a “safe haven” in times of severe market turbulence. However, this status has not worked since the beginning of the Russian-Ukrainian conflict, because soaring energy prices are widening the trade deficit of Japan, a major importer of hydrocarbons.

The BoJ continues to view the weakness of the yen as an overall positive for the Japanese economy for the time being, notably by improving the price competitiveness of the country's exports and boosting the profits of its companies when they convert their earned income into yen. abroad.

But this dogma, to which the government also adheres, has begun to be debated in Japan. Because the sharp drop in the yen combined with soaring energy prices is weakening small and medium-sized businesses focused on the national market, as well as the purchasing power of Japanese households, whose consumption is already at half-mast.

Japanese politicians have recently multiplied statements expressing alarm at the national currency's plunge. On Tuesday, Japanese Finance Minister Shunichi Suzuki assured that the government would “closely follow developments in the foreign exchange market”.

Prime Minister Fumio Kishida for his part considered before Parliament that rapid fluctuations in the rate of the yen were "undesirable" and that the stability of the exchange rate was "important".

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13 April, 2022 10:26

← Wall Street: inflation, Fed and oil

In US economic news this Wednesday, the producer price index for March 2022 will be released at 2:30 p.m. (consensus +1.1% compared to the previous month and +10.6% year-on-year; +0 .5% excluding food and energy, i.e. +8.4% over one year).

Wall Street: inflation, Fed and oil

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12 April, 2022 10:22

Germany: historically high inflation in March confirmed →

Inflation in Germany has indeed reached 7.3% in March, a level not seen for more than 40 years, according to final figures published on Tuesday, the war in Ukraine causing the prices of energy and foodstuffs to soar.

 

Germany: historically high inflation in March confirmed
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