Something Strange Behind the Yen's Weakening
The Japanese Yen (JPY) moved within a narrow range against the US dollar during Friday's Asian session, remaining near the nine-month low reached the previous day. Prime Minister Sanae Takaichi's statement on Wednesday, which emphasized that the government still prefers low interest rates and wants close coordination with the Bank of Japan (BoJ), led the market to further lower expectations for an interest rate hike in the near future. This stance is one of the main reasons for the JPY's recent weak performance.
However, the market has not completely ruled out a BoJ interest rate hike. Market participants still see a 24% chance of a rate hike in December and a 46% chance in January. On the other hand, the recent rapid weakening of the JPY has prompted Finance Minister Satsuki Katayama and Economy Minister Minoru Kiuchi to issue warnings regarding currency movements. These warnings raise concerns that the government could intervene if the yen's movements are deemed excessive.
The combination of potential intervention, risk-off sentiment, and the tendency of market participants to sell the US dollar is making investors more cautious. They are reluctant to take aggressive positions in the USD/JPY pair, thus limiting the dollar's gains against the yen. As a result, the JPY remains weak, but the USD/JPY's upside potential isn't entirely clear, as the market continues to weigh the trade-off between low interest rates and the risk of intervention by Japanese authorities. (az)
Source: Newsmaker.id
