JAPAN TIMES



 

The yen posted its longest losing streak in at least half a century on bets further divergence between U.S. and Japanese interest rates is inevitable.

The yen fell to the ¥128 range against the U.S. dollar in Tokyo Tuesday, marking a fresh 20-year-low after breaking the ¥127 line in New York overnight.

The Japanese currency slid against the dollar for a 12th consecutive session on Monday after Bank of Japan Gov. Haruhiko Kuroda carefully ramped up his warnings on sharp yen moves while sticking with his commitment to keep stimulating a fragile economy.

The comments stood in stark contrast to hawkish remarks from Federal Reserve officials on the need for more aggressive rate hikes, which have buoyed the U.S dollar.

"The move in the yen is incredible,” said Bipan Rai, head of foreign-exchange strategy at CIBC. "But given the differing stances of the Fed and BOJ, it shouldn’t be all that surprising.”

Kuroda is facing a balancing act as he tries to ensure that cracks don’t emerge between the government and the central bank on the need to continue with monetary stimulus. While a weak yen is a positive for the economy, a rapid drop can disrupt corporate planning and bears close watching, he said Monday.

The yen fell to a 20-year low this month as the dovish BOJ keeps local yields anchored to the floor while their U.S. equivalents surge on expectations for aggressive Fed hikes. Monday’s decline marked its longest losing streak since records compiled by Bloomberg begin in 1971, when the U.S. left the gold standard.

The emerging consensus among traders in Tokyo is that it will reach ¥130 against the dollar in coming months.

The dollar, meantime, strengthened as Federal Reserve Bank of St. Louis President James Bullard said the central bank shouldn’t rule out rate increases of 75 basis points.