The Japanese yen briefly dipped to 148.46 against the U.S. dollar here on Monday, marking its lowest level since November 2022 as monetary policies diverge between Japan and the United States.
Analysts here noted that the Bank of Japan (BOJ)'s announcement last Friday following their two-day monetary policy meeting further contributed to the weakening yen.
Contrary to market expectations, the BOJ decided to maintain its ultra-loose monetary policy and did not abolish its negative interest rate policy.
BOJ Governor Kazuo Ueda on Friday told the press that achieving the target of 2 percent inflation was still a distant goal, necessitating the continued implementation of an accommodative monetary policy.
In stark contrast, the Federal Reserve in the United States signaled a potential further interest rate hike, and the increased interest rate differential has added pressure on the Japanese yen to depreciate against the U.S. dollar.
The Federal Open Market Committee anticipated that the appropriate level for the federal funds rate by the end of this year would be 5.6 percent, holding its key policy rate at between 5.25 percent and 5.5 percent.
Against this backdrop, the yield spread between Japanese and U.S. long-term interest rates has widened to 3.7 percent, reaching its highest level in ten months.
The current yen-to-dollar exchange rate has fallen below the 146 level seen in September of the previous year when the Japanese finance ministry intervened, nearing the 150 threshold.
Market watchers are now speculating that the Japanese government might intervene in the near future to prevent further depreciation of the yen.
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