Japanese Yen Drops to a 20 Year Low Against the Dollar

The yen hit its lowest level against the dollar in two decades on Wednesday, extending recent falls as the gap widens between Japan’s ultra-loose monetary policy and Fed tightening.

Despite being traditionally considered a safe-haven currency, uncertainty fuelled by Russia’s war in Ukraine has not caused the yen to strengthen.

However, the US Federal Reserve moves towards a more aggressive monetary policy and the shock of rising oil prices in Japan – a major importer of fossil fuels – has pushed the currency lower, analysts say.

One dollar bought 126 yen at around 0630 GMT on Wednesday, the lowest rate since 2002.

“The Japanese yen has been one of the weakest currencies anywhere in the world this year. Driving the rally has been the perfect storm of a hawkish Federal Reserve, a dovish Bank of Japan (BoJ), and Japan’s negative terms of trade shock as a major fossil fuel importer.”Dutch banking group ING in a commentary published last week.

The yen had already lost 10 per cent of its value against the dollar in 2021 after four years of strengthening.

Japanese Prime Minister Fumio Kishida did not comment directly on the yen’s fall when asked about it on Tuesday but emphasised the importance of stability in foreign exchange rates.

“I will refrain from commenting on the level of exchange rates, but their stability is important and I think rapid fluctuations are undesirable,” Japanese Prime Minister Fumio Kishida.

Read also; Kenya Shilling Drops Further to 115 Against the U.S Dollar.

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