Skip to content USDJPY Fundamental Analysis – May-29-2024
USD/JPY—The Japanese yen has fallen past 157 per dollar, marking its lowest point in four weeks. This depreciation is mainly due to a strong US dollar and rising Treasury yields.
USDJPY Fundamental Analysis – May-29-2024
These moves follow a weak auction for US government debt, which raised concerns about demand for US bonds. Additionally, a Federal Reserve official’s comments heightened worries about interest rates. This situation maintains a significant gap between US and Japanese yields, making yen carry trades attractive.
Seiji Adachi, a Bank of Japan board member, mentioned that the central bank might raise interest rates if the yen’s sharp decline leads to increased inflation. This statement reflects the Bank of Japan’s balancing act in managing economic stability.
Japan’s core inflation rate recently slowed to 2.2% in April from 2.6% in March, aligning with expectations due to milder food inflation. The overall inflation rate also dropped to 2.5% in April from 2.7% in March, continuing a two-month decline. These figures suggest that while inflation is easing, the yen’s depreciation could pose risks if it increases prices. (Source Bloomberg)
Conclusion
Understanding the yen’s recent movements is crucial for those observing the global economy. The interplay between US Treasury yields, Federal Reserve policies, and Japan’s inflation data will continue to influence the yen’s value. Staying informed about these factors can help individuals and businesses make better financial decisions in an uncertain economic landscape.
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