2024-04-30 11:36:00
King dollar stimulates global inflation
As the value of the Japanese yen fell sharply, the yen-dollar exchange rate exceeded 160 yen per dollar on the 29th. This is the highest exchange rate in 34 years since April 1990.
In the morning of this day, the yen-dollar exchange rate rose to 160.245 yen in the Asian foreign exchange market, but plummeted to the 154 yen range in the afternoon. Kyodo News reported that the Japanese government and the Bank of Japan (BOJ) may have intervened in the exchange rate. The won-yen exchange rate also fell to 876.15 won per 100 yen, hitting the lowest level in over five months. When the value of the yen falls, the yen-dollar exchange rate rises. The won-yen exchange rate falls.
The value of the yen has fallen sharply since January due to the wide interest rate gap between the United States and Japan. In particular, the yen-dollar exchange rate soared as the BOJ froze the base interest rate at its financial policy decision meeting on the 26th. The British daily Financial Times (FT) pointed out on the 28th that a strong dollar could lead to a weakening of Asian currencies overall, promoting global inflation and increasing the debt repayment burden of emerging countries.
‘Super-yenger’ shock due to the ultra-strong US dollar… Damage to Korean export companies is inevitable.
The value of the yen plummets to its lowest level in 34 years.
Japan’s unexpected interest rate freeze fuels the weak yen… The timing of the U.S. Federal Reserve’s interest rate cut will likely be an inflection point.
Concerns about weakening Korean steel-IT price competitiveness… Won-yen synchronization may increase inflation pressure
The plunge in the value of the Japanese yen is largely due to the weakening expectations of a base interest rate cut by the U.S. Federal Reserve (Fed) and the growing pressure on the ‘King Dollar’ (ultra-strong U.S. dollar) around the world. This can be interpreted as a result of growing speculation that it will take longer than the market originally expected for Japan to raise interest rates, as well as concerns about a widening interest rate gap between the United States and Japan. It is predicted that if this ‘super yen’ phenomenon continues for a long time, damage to domestic export companies will be inevitable.
The yen has continued to decline as the U.S. Federal Reserve’s interest rate cut has been delayed. The yen, which stayed at the 140 yen per dollar range in January of this year, rose to the 140-150 yen range in February, and exceeded 150 yen last month. Even though the Bank of Japan (BOJ) ended its negative interest rate policy last month for the first time in 17 years, the yen is weakening due to the ultra-strong dollar. The dollar index, which shows the value of the dollar against six major currencies, rose from 102-103 in January to 104 in February, and exceeded 106 this month.
In addition, expectations that Japan’s foreign exchange authorities will return to a tight monetary policy have weakened, causing the value of the yen to fall relatively further. The Nippon Keizai Shimbun analyzed that the decline in expectations of further interest rate hikes by the BOJ had an impact. Previously, the BOJ broke market expectations and decided to freeze interest rates at its financial policy decision meeting on the 26th. This is due to the judgment that the low yen is not having a significant enough impact on prices to lead to a change in monetary policy. Choi Je-min, a senior researcher at Korea Investment & Securities, said, “As predictions spread that the interest rate gap between the U.S. and Japan will continue or expand further, speculative foreign exchange funds selling yen and buying dollars may also have had an impact on the overshooting (short-term surge) of the yen-dollar exchange rate.” explained.
As the impact of the dollar’s strength is significant, analysts say that how long the current ‘super yen’ phenomenon will continue depends on the timing of the U.S. interest rate cut. Moon Nam-joong, a senior research fellow at Daishin Securities, predicted, “We initially expected that the yen would strengthen if Japan lifted its negative interest rate policy, but seeing that it has not changed much, it appears that the timing of the Fed’s interest rate cut will ultimately serve as an inflection point.” . However, as the possibility of actual intervention by the Japanese foreign exchange authorities was raised on this day, some predict that it is unlikely that the yen-dollar exchange rate will trend past 160 yen in the future.
If the ‘super yen’ continues for a long time, it may have a disadvantage for Korean companies. This is because the price competitiveness of domestic companies competing with Japan, including steel and information technology (IT) items, may weaken and exports may decline. Seok Byeong-hoon, a professor of economics at Ewha Womans University, said, “It is highly likely that Korean companies will take a hit in exports to the U.S., especially because it means that Japanese products are significantly more price competitive than Korean products in the U.S. market.”
There are also voices expressing concern about won-yen synchronization. If the value of the won, which has recently become more in sync with the yen, falls simultaneously, it will inevitably stimulate import prices and increase inflationary pressure. There is also a possibility that the won-dollar exchange rate will exceed 1,400 won again in the short term.
Tokyo = Correspondent Lee Sang-hoon [email protected]
Reporter Hong Jeong-su [email protected]
Reporter Shin A-hyung [email protected]
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2024-04-30 11:36:00