The dollar-yen pair has fallen sharply this week. Last week, the dollar-yen exchange rate rose to the 116.35 level as the US monetary authorities expected an early rate hike to put pressure on the dollar and the yen’s depreciation. However, the dollar-yen pair has turned down since the beginning of this week, despite a series of high growth in rice price statistics.
The stock market, which had been a factor in the depreciation of the yen, began to collapse, prompting a shift toward a stronger yen. In addition, the fact that the rise in US bond yields has subsided in connection with this also seems to weaken the pressure on the dollar’s appreciation. In the market, movements to sort out the dollar buying positions that have been accumulated so far have also been observed. It is still unclear whether the dollar-yen pair’s depreciation will be a short-term adjustment or a new trend.
Behind the view that it is a short-term adjustment, there may be a series of speculations about the start of the US early rate hike and the reduction of the balance sheet from tapering. This is a scenario in which a rise in dollar interest rates leads to a stronger dollar again. On the other hand, the background of the view that the depreciation of the dollar is likely to be prolonged is that as the US economic recovery, which is currently conspicuous, spreads to Europe and emerging countries in the future, risk money seeking new investment destinations will come from the dollar. There seems to be a view that diversified investment will be made in other currencies. In addition, it seems that the BOJ is discussing the normalization of monetary policy in some media reports today, and that it is possible to raise interest rates before the inflation target is achieved, which has also invited yen buying.
This week, the USD has fallen sharply. However, the trend of economic easing contraction has not changed significantly, and I think it is the weakening of the USD caused by the position adjustment. In that case, I think that the trend of the weakening of the USD will not continue for a long time, but it is difficult to determine where it will stop falling.