The yen-dollar exchange rate rises to the mid-150 yen range.
Impact of rising long-term interest rates on U.S. Treasury bonds
On the 26th, the yen rose to the mid-150 yen range, hitting its lowest value this year.
According to NHK, the yen-dollar exchange rate in the Tokyo foreign exchange market rose to 150.44 yen per dollar at one point during the day, hitting the lowest this year. NHK explained that as long-term interest rates on U.S. Treasury bonds rose again, the interest rate gap between the U.S. and Japan widened, and the movement to buy dollars became stronger.
An official in the Japanese foreign exchange market said, “As wariness about market intervention by the government and the Bank of Japan (BOJ) is increasing, the price continues to fluctuate in the low to mid 150 yen per dollar range.”
Regarding the continued weakening of the yen, Japanese Finance Minister Shunichi Suzuki said on this day, “We are watching the trend with nervousness.”
The recent low yen situation is interpreted to be largely due to the widening interest rate gap between the United States and Japan due to the rise in U.S. bond yields following the rise in the U.S. benchmark interest rate. The 10-year Treasury bond yield, an indicator of long-term interest rates in the United States, is close to 5%.
In relation to the continued decline in the value of the yen, there is speculation that the BOJ may revise some of its monetary easing policies at its monetary policy meeting scheduled for the end of this month. Normally, the BOJ has intervened in the foreign exchange market, viewing the yen-dollar exchange rate of 150 yen as a defense line for the exchange rate.
The fact that Japan’s 10-year government bond interest rate is close to 1% is also grounds for expecting the BOJ to revise its policy. On this day, the 10-year government bond interest rate rose to 0.880% during the day in the Tokyo bond market. This is the highest level in about 10 years since 2013.
Previously, the BOJ announced in July that it would maintain the government bond interest rate ceiling at 0.5%, but allow interest rates to rise up to 1% depending on the situation. If it exceeds 1%, they will purchase government bonds. However, since then, government bond interest rates have continued to rise, exceeding 0.5%.
Source: Donga
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