Yen Defies Fed Hints, Stays Strong

1 Aug 2024 , 10:03 AM

The US dollar fell on Thursday after the Federal Reserve signalled that interest rates could be cut in September, keeping the yen near its highest level since March following the Bank of Japan’s hawkish tilt.

An action-packed Wednesday began with the BOJ hiking Japan’s interest rates to levels not seen in 15 years, prompting traders to reconsider popular carry trades, before the Fed maintained rates unchanged but hinted at rate reduction as US inflation cools.

The yen was turbulent in early trading, rising nearly 1% to 148.51 per dollar, its highest level since mid-March, before finishing slightly higher at 149.46.

The BOJ also announced intentions to cut its monthly Japanese government bond purchases in half by January-March 2026, with Governor Kazuo Ueda indicating that another increase is possible this year.

The yen rose 7% in July, its best monthly performance since November 2022, after beginning the month around 38-year lows thanks in large part to bouts of interventions by Japanese authorities totalling $36.8 billion.

Nonetheless, the yen has fallen 5.7% against the dollar this year due to the vast interest rate differential between Japan and the United States.

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