Japanese Yen Plunges to 32-Year Low Against US Dollar — Another Intervention by Authorities Expected – Economics Bitcoin News

The Japanese yen’s exchange rate versus the U.S. dollar recently plunged to its lowest rate in 32 years — 147.66 JPY per dollar. The yen’s latest fall comes less than a month after its slip in September prompted authorities to enter foreign exchange markets for the first time since 1998.

There is a widening gap between US Treasuries, Japanese Government Bonds and US Treasuries

According to reports, the Japanese yen dropped to 147.66 dollars per dollar. This is its lowest rate against the U.S. Dollar in 32 years. The yen’s latest record-breaking fall came after official figures from the United States showed that prices had gone up faster than anticipated. To contain inflation, the U.S. Federal Reserve used rate increases to stabilize it but this has led to the dollar strengthening against other currencies around the world.

However, unlike other central banks that have followed in the footsteps of the U.S. Federal Reserve and raised interest rates, the Bank of Japan (BOJ) is said to have maintained an “ultraloose monetary policy.” Investors have in turn responded to the resulting gap between U.S. Treasuries and Japanese government bonds by selling the yen.

As reported by Bitcoin.com News in September, when the dollar’s rise caused the yen to slip to a 24-year low versus the greenback, the BOJ responded by intervening in foreign exchange markets for the first time since 1998. According to a BBC report, authorities in Japan are again likely to respond to the yen’s latest plunge with another intervention.

The report quotes the Japanese Finance Minister Shunichi Suzuki who suggests that “appropriate action” will be taken to stop the yen from slipping further.

“We cannot tolerate excessive volatility in the currency market driven by speculative moves. We’re watching currency moves with a strong sense of urgency,” Suzuki reportedly said.

Preventing an ‘Adverse Financial Amplification’

The Japanese government spent nearly $20 billion to counter the fall of the Japanese currency against the USD in late September 2022. The intervention stabilized the yen but some analysts doubted the viability of the solution.

The International Monetary Fund (IMF), however, suggested in a blog that temporary foreign exchange interventions may be the best solution. As explained in the blog, such a foreign exchange intervention can “help prevent adverse financial amplification if a large depreciation increases financial stability risks, such as corporate defaults, due to mismatches.”

In addition to helping to diminish the threat to financial stability, foreign exchange intervention could also potentially aid a country’s monetary policy, notes the IMF.

“Finally, temporary intervention can also support monetary policy in rare circumstances where a large exchange rate depreciation could de-anchor inflation expectations, and monetary policy alone cannot restore price stability,” the IMF blog explained.

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Terence Zimwara

Terence Zimwara was a Zimbabwe award-winning journalist and author. He is a prolific writer on the economic woes of African countries, as well as digital currencies that can be used to provide an escape path for Africans.

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