The yen's downward trend has strengthened again. Although the Bank of Japan raised interest rates and conducted a rate check on the 18th of this month, the effect of steering the yen higher is viewed as temporary. Depending on the interest-rate differential with the United States and crude oil prices, the yen could return to around ¥160 per dollar, analysts say.
The yen's downward trend against the dollar has strengthened again in the foreign-exchange market. On the 18th of this month, the Bank of Japan raised its policy rate by 0.25 percentage points and conducted a rate check to ascertain prevailing exchange-rate levels. Although the market had priced in the BOJ's response, it viewed its effect in steering the yen higher as limited.
From the London market through the New York market, the yen weakened from around ¥157.80 per dollar to around ¥158. The yen's downward trend was also observed in the Tokyo market after the holiday break. Some analysts viewed the BOJ's rate check, unlike actual intervention, as a limited corrective measure.
Despite the BOJ's additional rate hike, the U.S. Federal Reserve unanimously decided to raise rates by 0.25 percentage points, setting its policy-rate target range at 3.75%–4.00%, while reports indicated that it anticipated another rate hike before year-end. The market continues to focus on developments in the interest-rate differential between the two countries.
Taborski of Dutch financial giant ING said the BOJ's dovish surprise had highlighted the gap with the Federal Reserve and suggested that the yen could return to around ¥160 per dollar if crude oil prices remained high. This view is adding to uncertainty over the future direction of exchange rates.