JPY slumps to ¥150 against USD, a new 32-year low

[MongiIG]

The inexorable rise in the dollar, as a direct result of a hawkish Fed, and the soft yen on the back of a dovish Bank of Japan, explains the move.

 Jeremy Naylor | Writer, London | Publication date: Thursday 20 October 2022

USD/JPY reaches 32-year high

There's been a big psychological level hit and passed with the dollar trading higher against the japanese yen at levels now not seen in more than 32-years, passing the ¥150 level.

And in doing so, it just highlights the big differences in the direction of trade for both currencies. But at the same time, it's all about what's happening with interest rates.

USD/JPY chart

Let's take a look at the chart because it really just goes to help to describe the situation as we see the Bank of Japan (BoJ) trying to encourage price rises in Japan.

It has been doing this the last 30 years, it has to be said. Over the period, it's been buying the Japanese yen, selling the dollar, trying to get some sort of opposite directional trade but failing pretty much all the time.

And in today's session, we have just crept over this red dotted line at the top of the chart here, where we're seeing this level now reached for the first time in more than 32 years. We got to go all the way back to July 1990, when we were last at these levels.

And we have actually, during the Asia crisis when we saw the Japanese yen pull back in the late 1990s, go to this level at around about 145, but nothing like this seen since the beginning of the 1990s.

Fed

So where do we go from here? Well, it is all about what's happening with the Federal Reserve (Fed). The next expectation is that we're going to get another 75-basis points in terms of interest rate rises from the Fed - the fourth time in a row.

We've seen three quarters of a percentage point up from the central bank in the states, trying to quell inflation. But at the same time we've got the Bank of Japan saying overnight it would hold emergency bond-buying operations, offering to buy some ¥100 billion worth of debt, about $660 million. For the past few months the yen has dropped against the dollar, hitting the widening difference between the US and Japanese interest rates. And I can't see this changing any time soon.

But now having hit this ¥150 level, if we do see any further prints on the upside, I suspect it could well take a time before we see anything meaningful against the dollar versus the Japanese yen.

EUR/JPY

Just to quickly show you that it's not just for the dollar against the yen, it's also the euro against the yen.

We've seen recent highs, but if you look back here at 14.720 that's the highest point we've seen there in these two crosses since December 2014. So, you can see the extreme values we're getting for the dollar against the Japanese yen in particular.