The United States released employment data, which unexpectedly caused the Japanese exchange rate to break below 145.
When the yen broke below 145 in September, the Bank of Japan had to intervene in the exchange rate. What will the Bank of Japan do this time as it breaks below 145 again?
01, First Break Below 145
So far this year, the US dollar index has been continuously rising, while the yen exchange rate has been continuously falling, with a total decline of 26.32%.
From the daily K-line chart of the US dollar against the yen, we can see that the decline of the yen mainly started in March, which coincides with the first interest rate hike by the Federal Reserve in March.
In May, the yen exchange rate rebounded somewhat, but it continued to fall in June. Then, starting from June, the yen entered another decline until a rebound occurred in late July.
However, in August, as the market began to predict a significant interest rate hike by the Federal Reserve in September, the yen began a fierce decline. This decline finally broke the important threshold of 145 in mid-September when the Federal Reserve raised interest rates.
02, Breaking Below 145 Again
Although the Bank of Japan had already started to take some actions before this, there was no substantial intervention in the foreign exchange market. It was not until after breaking below 145 that the Bank of Japan had to directly intervene in the foreign exchange market for the first time since the 1998 Asian financial crisis.
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The Bank of Japan forcibly pulled the exchange rate back below 145 by buying yen and selling US dollars. This time, a cumulative amount of up to 3.6 trillion yen was used.A few days ago, the US Dollar Index retreated from 114 to 110, leading to varying degrees of appreciation in several non-US currencies.
However, the Japanese yen exhibited rather peculiar behavior during this period, not experiencing an exchange rate increase but instead slowly depreciating once more, inching closer to the 145 level.
Due to expectations of favorable US employment data, the US Dollar Index began to strengthen again from Wednesday, and by Friday, when the final employment figures were released, they indeed exceeded market expectations. The US Dollar Index rose to 112.77.
Concurrent with the release of US employment data, the Japanese yen also fell in line, once again breaking through the 145 barrier.
Why is the depreciation of the yen breaking through the 145 level considered a significant threshold?
In 1998, the US dollar reached 147 against the yen, but for more than 20 years since then, the worst exchange rate for the yen has not exceeded 140.
Experts have calculated that if the yen breaks through the 145 threshold, it will significantly increase the difficulty for the Bank of Japan to maintain Japanese government bond yields.
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