The Yen Falls to 1990’s Lows

Thursday saw the dollar reach the symbolic threshold of 150 yen for the first time since 1990, while the British pound had bumpy trading as Liz Truss announced her resignation as prime minister of the United Kingdom.

The Japanese yen dropped quickly from an overnight trading high of 150.09 to 149.63 in less than a minute, sparking concern that the Bank of Japan and Ministry of Finance may be undertaking covert interventions at crucial levels. However, the yen recovered to reach record 32-year highs in afternoon New York trade, rising as high as 150.25. It was last at 150.18. Although the prospect of such intervention is uncertain, some experts believe that even if it occurred, the Bank of Japan’s ultra-dovish monetary policy would not change enough to prevent the yen from losing much more ground.

Will the Rate Rise Continue?

As long as inflation is stubbornly high, the Federal Reserve should keep hiking interest rates; some predict its benchmark overnight interest rate will reach above 5%. The rate is presently between 3.00% and 3.25%.

Patrick Harker, president of the Philadelphia Fed, stated on Thursday that the U.S. central bank would likely find room next year to halt the tightening process and assess how its rate rises affect the economy. This is despite extremely high levels of inflation, he added.

Even if other sectors, including the employment market, are still strong, the housing market has been one of those most impacted by increasing rates. Data released on Thursday revealed that in September, existing house sales in the United States declined for the eighth consecutive month. U.S. yields and the dollar rose on expectations of rising rates, especially versus the yen, because the BOJ wants to keep interest rates at zero.

On Thursday, Japanese leaders once again threatened to intervene. They are perceived as more inclined to intervene if currency fluctuations grow irregular.