Yen Squeezed as Hawkish Central Banks Pressure Japan
· Business · LiveMint, Economic Times
The Japanese yen remained under pressure against a firm dollar on Tuesday as traders anticipated policymakers struggling to keep pace with a hawkish turn by global central banks. Japan's wide interest-rate gap with major peers continued to weigh on the currency, which traded at 157.33 against the dollar. Downside moves remained contained due to a public holiday in Japan and lingering intervention risks following a Nikkei report that authorities checked dollar/yen rates on Friday. The pressure on the yen follows a Bank of Japan interest rate hike last week that featured two dovish dissents, contrasting sharply with the Federal Reserve and other global central banks signaling further rate increases. Economists note that the roughly 275-basis-point US-Japan rate differential will likely continue supporting yen-funded carry trades unless the Bank of Japan tightens policy more rapidly.
Why it matters
The widening interest rate gap between Japan and global peers affects foreign exchange markets and currency-funded carry trades, with analysts projecting further depreciation for the yen by year-end.
Read the original report — LiveMint
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