The Japanese currency fell sharply against the U.S. dollar on Wednesday afternoon after the Bank of Japan Governor Haruhiko Kuroda expressed his intention to continue Japan’s ultra-easy monetary easing.
“Kuroda’s strong commitment to monetary easing at a point when the dollar was hovering around 125 yen” fueled dealers to unleash the Japanese currency, said Yuji Saito, head of the foreign exchange department at Credit Agricole Corporate & Investment Bank in Tokyo.
The Japanese yen plunged to its lowest level against the U.S. dollar in nearly 20 years amid a widening monetary policy gap between the Bank of Japan (BOJ) and the U.S. Federal Reserve.
During Tokyo’s trading, the currency sank to the lower 126 yen level against the dollar, its weakest level since May 2002.
Last month, the U.S. Federal Reserve decided to raise key interest rates for the first time since 2018 to tackle soaring inflation.
The BOJ on the other hand maintained its monetary easing and conducted an emergency bond-buying operation to keep 10-year Japanese government bond yields from rising above their implicit upper limit.
The rapid weakening of the yen has raised concerns about the negative impact it will have on Japan’s economic recovery from the coronavirus pandemic.
“Sharp foreign exchange moves are very problematic, and we will keep a close eye (on the currency market),” Finance Minister Shunichi Suzuki said.
Chief Cabinet Secretary Hirokazu Matsuno also said that sharp moves in exchange rates are “undesirable.”
® — All Rights Reserved.
This material may not be published, broadcast, rewritten or redistributed.