Yen Unlikely to Repeat 2024 Summer Surge as U.S. Rates Stay High
A repeat of the sharp yen appreciation seen in the summer of 2024 is unlikely under current conditions, with persistently high U.S. interest rates and continued structural pressure on Japan's currency making another rapid surge difficult, according to UBS wealth management chief investment officer Daiju Aoki. (News On Japan)
The Japanese yen is unlikely to repeat the rapid surge observed during the summer of 2024, according to UBS wealth management chief investment officer Daiju Aoki. High U.S. interest rates and structural pressure on Japan's currency make another significant appreciation challenging. While coordinated currency intervention can temporarily shift exchange rates, lasting changes require shifts in policy or the broader economy.
The current phase may present an opportunity to enter the dollar at a relatively low price, with the dollar expected to remain near 155 yen to 157 yen. U.S. inflation, Federal Reserve policy changes, and the growth of artificial intelligence investments may keep long-term yields elevated, further supporting the yen's strength. Japan faces domestic forces, such as government bond yields and the Bank of Japan's gradual rate increases, that could weaken the yen despite higher interest rates.
A surprise rate increase from the Bank of Japan may be unlikely, as policymakers may instead signal a move before acting. Ultimately, the yen's long-term direction hinges more on demand for the currency and Japan's accommodative fiscal and monetary policies.
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