Yen rebounds from 32-year low on hopes of slower pace of Fed rate hikes

The Japanese yen bounced back from a 32-year low on speculation that the U.S. central bank would slow rate hikes, prompting some analysts to hope a historic period of weakness is coming to an end. It is rising.

Over the past three weeks, the yen has appreciated against the dollar from 151.94 yen to about 139 yen. Most of these moves were made during US market hours as investors scrutinize signals from the Federal Reserve that they may slow the pace of future interest rate increases. .

A sharp decline in the yen in recent months has sounded alarm bells for Japan as the economy contracted for the first time in a year in the July-September quarter on rising bills for imported goods and food. , $200 billion spending package To mitigate the impact on families of burgeoning costs of living.

But forex analysts and economists say the yen’s value has fallen despite enormous efforts by Japanese authorities to shore up the yen with interventions worth about 9 trillion yen ($64 billion) since September. He said the fate was decided by the Fed and the dollar.

Takahide Kiuchi, executive economist at Nomura Research Institute, said it was too early to declare the end of the strong dollar trend until the Fed actually started to shift down from its 0.75-point rise. Moon.

US inflation was lower than expected in October, adding to optimism that the Fed will start slowing its pace of monetary policy tightening. Kiuchi, a former director of the Bank of Japan, said the turning point for the yen was near. This is the beginning of the end of the yen’s depreciation.”

The beginning of the end of the yen’s depreciation

Yujiro Goto, chief forex strategist at Nomura Securities, said investors were nervous about calling for an end to the sell-off despite what appeared to be a decisive recovery in the yen recently.

In the coming weeks, the yen could fall toward 145 against the dollar ahead of the Fed’s meeting in mid-December, Goto said, but the yen could fall below the 150 level. is low.It has decreased now.

“Additionally, I think the current account is recovering with the reopening of borders and the return of tourists, and oil prices seem to have peaked, so the biggest yen selling is likely to be postponed. If there is a Fed pivot, it will invite dollar selling globally,” Goto said.

Equity brokers say clients have recently taken a strong interest in Japanese stocks, which appear to be very cheap, but have held back as long as there is a risk that the yen will fall further.

However, some have not ruled out another drop. Bank of America forex and rates strategist Shusuke Yamada said the market needs to see more evidence that U.S. inflation is calming before the dollar peaks.

“The labor market remains tight and wage growth is strong. The corporate sector is fundamentally creating selling pressure on the yen, he added.