The Yen exchange rate once depreciated to 149

On July 15, the yen exchange rate against the US dollar fell in the New York foreign exchange market, once reaching the range of 1 dollar to 149 yen. This is the first time that the yen exchange rate has fallen to the 149 yen range in three months since April 3. As the Japanese Senate election will be held on July 20, it is unclear whether the ruling party, which is currently composed of the Liberal Democratic Party and the Komeito Party, can hold a majority of seats. The market is worried that the ruling party will need to cooperate with the opposition party that advocates expanding fiscal spending. This view has led to the yen being sold against multiple currencies.

The Nihon Keizai Shimbun conducted a final election opinion poll for the Senate election from July 13 to 15. The results showed that the current situation has become very delicate, including the non-re-election seats, whether the Liberal Democratic Party and the Komeito Party can obtain the 50 seats required for a majority. There is a view in the market that if the ruling party needs to cooperate with the opposition party that proposes expansionary fiscal policies including consumption tax cuts, the Japanese government’s debt will further expand, which has triggered selling pressure on the yen.

Market insiders pointed out: “Some hedge funds bet that the ruling party will lose its majority advantage in the Senate election and have increased their short positions in the yen in advance” (a foreign bank trader).

In addition, the Consumer Price Index (CPI) in June announced by the U.S. Department of Labor on July 15 rose 2.7% year-on-year, accelerating from 2.4% in May. Although the increase was within market expectations, the market’s expectations for the Federal Reserve (FRB) to cut interest rates in advance have cooled due to the confirmation of the signal of “accelerating inflation”, and the U.S. dollar has strengthened against many currencies. This has also become another reason for the yen to be sold off.