Yen extends its longest losing streak in at least 50 years

As comments by a Federal Reserve policy maker reinforced investor views that the gap between US and Japanese interest rates will widen further.
Image: Kiyoshi Ota/Bloomberg

The yen extended its longest losing streak in at least half a century as comments by a Federal Reserve policy maker reinforced investor views that the gap between US and Japanese interest rates will widen further.

Japan’s currency slid for a 13th day against the dollar, the longest run of losses in Bloomberg data starting in 1971, after Federal Reserve Bank of St. Louis President James Bullard said US interest rate increases of 75 basis points should not be ruled out to curb inflation.

The yen extended its drop against the dollar to a new 20-year low even as Japan’s Finance Minister Shunichi Suzuki stepped up his rhetoric. “We are monitoring moves in the foreign exchange market with a strong sense of vigilance,” Suzuki said on Tuesday. Bank of Japan Governor Haruhiko Kuroda on Monday also ramped up his warnings on sharp yen moves while sticking with his commitment to keep stimulating a fragile economy.

“Unless Japan’s policy — monetary policy and policy related to currency — is realigned, verbal or physical interventions won’t be effective,” said Yuji Kameoka, chief FX strategist at Daiwa Asset Management in Tokyo.

Japan last intervened to sell dollars and buy yen in June 1998 at the height of the Asian currency crisis. Japan has traditionally intervened to weaken the yen as a huge current account surplus exerted upward pressure on the yen. Japan has not stepped into markets since November 2011.

“Until the BOJ changes its ultra-dovish stance, the monetary policy divergence argues for continued yen weakness and intervention would likely have little lasting impact.” said Win Thin, global head of currency strategy at Brown Brothers Harriman & Co.

The yen dropped as much as 0.8% Tuesday to 127.97 per dollar, the weakest level since May 2002. It has slumped more than 4% since its current run of losses began on April 1.

BOJ Governor Kuroda is facing a balancing act as he tries to ensure that cracks don’t emerge between the government and the central bank on the need to continue with monetary stimulus. While a weak yen is a positive for the economy, a rapid drop can disrupt corporate planning and bears close watching, he said.

The drop comes as the BOJ keeps local yields anchored to the floor while their US equivalents surge on expectations for aggressive Fed hikes. The emerging consensus among traders in Tokyo is that it will reach 130 against the dollar in coming months.

Asset managers boosted bearish wagers to a record last week, while leveraged fund net-short positions were just off the highest in more than three years, data from the Commodity Futures Trading Commission show.

© 2022 Bloomberg

COMMENTS   0

You must be signed in and an Insider Gold subscriber to comment.

SUBSCRIBE NOW SIGN IN

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
BTC / USD

Podcasts

Instrument Details  

You do not have any portfolios, please create one here.
You do not have an alert portfolio, please create one here.
INSIDER SUBSCRIPTION APP VIDEOS RADIO / LISTEN LIVE SHOP OFFERS WEBINARS NEWSLETTERS TRENDING

Follow us:

Search Articles:
Click a Company: