By Jamie Chisholm
The Japanese yen slumped to nearly its lowest level versus the U.S. dollar in 34 years on Wednesday as traders continued to dismiss the impact of the Bank of Japan’s exit from negative interest rates.
The retreat prompted Eisuke Sakakibara, a former foreign exchange official in Japan known as Mr. Yen to say it was likely Tokyo would enter the market to support the currency if it fell much further against the buck.
“155, 160 is a little bit excessive. If that happens, they may intervene,” Sakakibara told CNBC on Wednesday, in reference to yen buying by Japan’s Ministry of Finance.
Sakakibara earned the sobriquet Mr. Yen when his observations on foreign exchange during his tenure as Japan’s vice minister of finance and international affairs in the 1990s would often move the market.
In European trading on Wednesday the yen (USDJPY) lost 0.4% to 151.5 per dollar, leaving it just 50 pips or so shy of its weakest versus the buck since 1990. The Japanese currency at one point fell to 164.76 per euro (EURJPY), its lowest in 16 years.
The yen’s retreat comes after the Bank of Japan on Tuesday raised interest rates for the first time in 17 years, but only took borrowing costs from minus 0.1% to a range of zero to 0.1%, and said it would be cautious about tightening policy further.
With official interest rates in the U.S. and eurozone at a range of 5.25% to 5.5% and 4% respectively, traders still consider the dollar and euro to offer an attractive yield differential.
However, Mr, Yen said he thought the tide would soon turn for the Japanese currency given the countries long period of deflation is over and yield differentials will shrink.
“The period of inflation is forthcoming,” Sakakibara told CNBC, adding that he expects the yen to strengthen to 130 per dollar by the end of 2024 or early 2024.
-Jamie Chisholm
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
03-20-24 0552ET
Copyright (c) 2024 Dow Jones & Company, Inc.
