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by The Japanese yen fell to 160.5 per dollar, its weakest since 1986, before recovering slightly. Finance Minister Shunichi Suzuki warned again about quick, one-sided yen changes, stating they are not good and that actions would be taken if needed.
Yen’s Decline Sparks Interest Rate Speculation
The yen has dropped around 2% against the dollar in June, making its total decline nearly 14% this year. This drop is due to the Bank of Japan’s slower pace in adjusting monetary policy than what markets expected. However, in its July meeting, the central bank hinted at a possible interest rate hike and plans to outline steps to reduce its bond purchases next month.
Additionally, retail sales data showed a 3% rise in May from the previous year, up from 2.4% in April and beating the 2% growth forecast.
USDJPY Fundamental Analysis – 27-June-2024
USDJPY Fundamental Analysis – 27-June-2024
The USD/JPY pair’s recent movements reflect vital economic developments and policy expectations from Japan and the United States. The Japanese yen’s significant depreciation, reaching levels not seen since 1986, highlights the impact of differing monetary policy approaches. The Bank of Japan (BOJ) has maintained a cautious stance on policy normalization, lagging behind global trends. This has resulted in a substantial 14% year-to-date decline in the yen.
However, hints from the BOJ about a potential interest rate increase in July and plans to reduce bond purchases indicate a shift towards tightening, which could support the yen. These expectations may curb further sharp declines.
On the economic front, Japan’s retail sales showed robust growth, with a 3% increase in May, surpassing expectations. This suggests underlying strength in the domestic economy, which could influence future BOJ policy decisions.
Final Words
The fundamental analysis indicates that while the yen has been under pressure due to BOJ’s dovish stance, upcoming policy shifts and solid economic data might stabilize or even strengthen the yen against the dollar shortly.
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