The Yen is "knocked out". Overview for 19.10.2022

The Japanese yen paired with the US dollar has updated another low. The current quote in the USDJPY is 149.38. The depreciation of the yen seems to have gained a "second wind" - the rate of decline of the Japanese currency has increased recently. It is likely that this is due to the fact that the US Federal Reserve maintains a "tight" interest rate stance. The difference in monetary strategies between the Fed and the BoJ is working against the latter.

In comments today the Governor of the Bank of Japan, Haruhiko Kuroda, described the current yen depreciation as undesirable. It is important that the market reflects the fundamentals of the economy and finance to maintain stability. The yen's recent movement has been one-sided and makes it difficult for businesses to "plan ahead". As emphasised by the BoE, this factor is a disadvantage for the economy.

The lower the yen, the more likely there will be new financial interventions by the Japanese regulator. This mechanism will not have a pronounced effect. The most that can be expected is a "pause" in sales. After a while they will come back with renewed vigour, as they did quite recently.