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USD/JPY pair hit a historic level. What do analysts say?

Started by PocketOption, Oct 21, 2022, 02:03 pm

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USD/JPY pair hit a historic level. What do analysts say?

USD/JPY pair hit a symbolic level. What do analysts say?

USD/JPY pair hit the symbolic level. What do analysts say?


The U.S. dollar reached the crucial level of 150 yen for the first time since 1990 today. The struggling Japanese yen briefly plunged past 150 per greenback in early European trading. It exchanged hands at 149.7 yen per USD at last. The Japanese currency has been losing steadily for 11 consecutive sessions. Moreover, it has suffered 32-year lows for six straight sessions now.

On the other hand, Treasury yields skyrocketed to multi-year highs, bolstering the already rallying greenback. Markets are waiting for intervention from the Japanese government now, as the latter promised to support its currency if the Yen continued its losing streak.

Takumi Tsunoda, the senior economist at Shinkin Central Bank Research Institute in Tokyo, noted that until the investors remain unclear about the size of the next U.S. interest rate hike, the greenback's strength won't subside. Tsunoda also added that 150 was a passing point, and traders are now waiting to see if the pair tops 160.

On Thursday, the benchmark U.S. 10-year Treasury yield surged forward to 4.18%, hitting its highest level since 2008. At the same time, the two-year Treasury yields skyrocketed to a 15-year peak of 4.614%. This news boosted both the U.S. yields and the dollar higher, and the already declining yen was no match for the latter.

Market participants think the Federal Reserve will likely continue hiking interest rates. Inflation is still soaring in the United States, and the agency is determined to bring it down. However, the Japanese Yen is in the spotlight now, as well. Its government has already intervened recently to bolster the falling currency and may do that again.


What is the economists' forecast? 

Derek Halpenny, the head of research, global markets EMEA at MUFG, stated that the Ministry of Finance has been very clear that they would intervene in case of any disorderly price action. If the pair breaks clearly above 150, the markets may see some disorderly price action. The bank will probably act after that. However, it would take a sharp move in the USD/JPY pair to trigger another intervention.

Meanwhile, other major currencies were subdued during this session. The euro surged forward by 0.5% at $0.9826 today. It managed to recover some losses from the previous day. On the other hand, the British Pound remained weak due to turmoil in British politics.

The common currency gained 0.4% versus the Sterling. In Britain, the departure of the interior minister put more pressure on Prime Minister Liz Truss. ING analysts noted that political infighting and the uncertainty about the policy weigh on the Pound. As a result, the GBP/USD pair can drop to the bottom end of its 1.10-1.15 range. At last, the Sterling traded flat versus the greenback at $1.1231.

In Asia, the Chinese offshore yuan plunged to a record low of 7.2794. The currency hit its weakest level since 2011. According to reports, China is contemplating whether to cut the Covid-19 quarantine’s duration for inbound visitors from 10 days to 7 days.

Meanwhile, the Swiss franc and the Australian and Canadian dollars rebounded against the U.S. dollar. They managed to recover some losses from the previous day.


How are the EM currencies faring? 

The South African rand soared by 0.2% versus the greenback on Thursday, while most central and eastern European currencies rallied against the euro. The Hungarian forint gained the most. Poland’s zloty also jumped by 0.5% versus the common currency. According to new data, Polish producer prices increased to 24.6% year-over-year in September. That is below the forecast.

Furthermore, the Turkish lira traded in the green today after briefly tumbling to a record low. The country’s central bank cut rates more than analysts expected. The lira exchanged hands at 18.58 against the USD. It climbed up from 18.6 reached on Wednesday, as well as a record low of 18.6150 it hit briefly after the rate announcement. Turkey’s central bank announced a 150 basis-point cut to 10.5%.

Ipek Ozkardeskaya, the senior analyst at Swissquote, noted that inflation is very high in Turkey, and a higher interest rate cut doesn’t make sense. The central bank will be able to spend all the money it gets in order to keep the dollar stable. However, if the money stops coming in, then the country won’t be able to keep the lira at the current levels against the greenback.


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