Japanese yen exchange rate on Forex has updated a minimum since 1998

The yen continues to fall against the U.S. dollar against the background of the loose monetary policy of the Bank of Japan. For the first time since 1998, the dollar exchange rate exceeded 139 yen per dollar. Over the past year, the yen has fallen by almost 25%.

The dollar against the yen in the Forex market exceeded 139 yen for the first time since September 1998. As of July 14, the dollar rose 1.4% to 139.38 yen per dollar. Then, by July 22, the USD/JPY currency pair corrected to 137.064 yen per dollar.

Since the beginning of this year, the Japanese currency has depreciated by about 20%, and over the past year, the Japanese yen has fallen in price against the U.S. dollar by a total of almost 25%. The main reason for this trend was the discrepancy between the super-soft monetary policy of the Bank of Japan and expectations of further tightening of the US Federal Reserve's policy in order to stop inflation growth.

Last month, the Fed raised its benchmark interest rate by 75 basis points, the sharpest increase since 1994. In total, the Fed has raised interest rates by 150 basis points since March. Inflation in the U.S. in June accelerated to a new 40-year high. Over the year, prices rose by 9.1% after 8.6% in May and against the forecast of 8.8%. Rising inflation provokes the Federal Reserve to further tighten monetary policy, which leads to an increase in demand for the dollar, experts said.

The Central Bank of Japan cannot easily afford to raise rates due to the high level of debt. High interest on public debt service is a critical component for Japan. Debt servicing accounts for a quarter of the country's state budget, experts said.

In Japan, the rate has remained negative since 2016. The country's regulator is pursuing an extremely soft policy, keeping the loan rate actually at a minus level to stimulate the economy. At the meeting on June 17, the Bank of Japan left unchanged the main parameters of monetary policy. The short-term interest rate on deposits of commercial banks with the Central Bank was left at minus 0.1% per annum, the target yield on Japan's ten-year government bonds is near zero. The Bank of Japan also confirmed that it is ready for further policy easing if necessary.

The U.S. dollar may continue rising to 140 yen and higher per dollar, believes currency market analyst Martin Duling. This mark may provoke profit-taking on long positions in the dollar, as it is considered a red line, the crossing of which increases the risk of coordinated intervention in support of the yen, the expert said.

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Tags: usdjpy, dollar, yen, updated minimum