Photo: iStock

Photo: iStock

This week, the yen hit a four-year low just above 115 against the dollar. The current wave of weakness in the JPY, which started in late September, is driven by higher yields on US Treasuries as well as the widespread strength of the dollar amid inflation fears and strong growth momentum .

“The Federal Open Market Committee’s policy normalization expectations have not only increased the yield of the 10-year Treasury, but also widened the spread between the 10-year swaps of the United States and Japan, which supports the ‘USD / JPY,’ says Kim Mundy, currency strategist at Commonwealth Bank of Australia (CBA).

The last intervention to sell USD and buy JPY was probably… in the midst of the Asian financial crisis

Joey Chew, HSBC


The ultra-accommodative stance of the Bank of Japan (BoJ) has helped push the yen down, and the policy difference between the central banks of Japan and the United States will become even more pronounced if, as expected, the Federal Reserve begins to raise interest rates in early 2022 while the BoJ maintains its short rate at -0.1%.

According to Adam Button, chief currency analyst at ForexLive, the market is sending a strong signal that inflation is here.