The Japanese yen (6J=F) reached its weakest level against the US dollar (JP=X) since 1986. In response, Japanese Finance Minister Shun’ichi Suzuki stated in a Bloomberg report: ” We are deeply concerned about the impact on the economy. We will review the background to this change with a heightened sense of urgency and take necessary action as necessary.
Yahoo Senior Finance Reporter Jared Blikre joins Morning Brief to break down the numbers behind the yen and the US dollar and what it means for the future of foreign markets.
For more expert insights and the latest market action, click here to watch this full episode of Morning Brief.
This post was written by Nicolau Jacobino
Video transcript
The Japanese yen has reached its weakest level against the dollar since 1986.
We are getting some comments from Japan’s finance minister saying that they will do whatever is necessary to help support the currency.
Help support the yen.
Yahoo Finance’s Jared Licky has the breakdown for us, Jared.
That’s right.
It’s all speculation about when the next Y intervention will occur.
And let me show you the Japanese yen versus the US dollar here.
And this is the opposite of what you were seeing in yours, where we have 100 and 60 yen to the dollar.
This shows more intuitively that a lower price means a lower yen.
And that’s what we’re seeing here.
Like, uh, even the, uh, Wi Fi Interactive is sinking in on me.
Now here’s a five-year chart and we can see, oh my goodness.
Uh, that’s pretty deep down.
In fact, if we go to a maximum chart, you’ll find that this goes back to the late nineties.
Uh, you have to go back to 1986 to find something this low relative to the yen.
So I mentioned that it’s all about Wall Street trying to figure out and trying to win when the next intervention will occur.
This is decided by the Ministry of Finance.
And all of this happens because the Japanese have kept their interest rates so low, um, compared to the rest of the world.
You know, you look at the United States with rates above 5%.
The Japanese just raised them for the first time in decades and they are at 0.1%.
So, uh, there’s not much incentive for the currency to change to the yen.
And in fact, we have something called the Kerry trade, which is where this is a very prevalent trade over the last 25 years, maybe longer, where hedge funds borrow in yen and invest that money in foreign markets at interest rates. higher interest rates, like the USA. All this to say that a huge trade will be undone, but we don’t know exactly when at the Ministry of Finance.
Whenever they intervene, it can be a potential trigger
