Background of the recent yen depreciation
On April 28, 2022, the yen weakened. The yen fell to about 130 per dollar, marking a yen depreciation and dollar appreciation not seen in about 20 years since April 2002.
The Bank of Japan decided to hold its monetary easing at the monetary policy meeting, highlighting once again the divergence in monetary policy direction with the United States, which is moving toward rate hikes.
Before the policy change announcement, the yen traded in the upper 128s per dollar, and after the announcement it moved more than 1 yen weaker against the dollar (yen weaker, dollar stronger) (from Bloomberg).
This time, FX market participants were waiting for the decision meeting, and the timing of the yen’s weakness may have coincided with the decision meeting, but it feels strongly influenced by the euro’s weakness.
The yen is also weak against the euro, but if the euro is so clearly weakening, it cannot be said that the yen is uniquely weakening, making FX intervention difficult.
The yen is also weak against the euro, but if the euro is so clearly weakening, it cannot be said that the yen is uniquely weakening, making FX intervention difficult.
If it’s yen and dollar, it becomes difficult for the dollar to strengthen further immediately (most of the difference in future monetary policy is already priced in), but if the euro drags things along, the situation becomes more complex.
What will happen to the euro area’s trade balance?
No idea right now.
No idea right now.
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