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Special topic: A-share ups and downs The organization expects that the stock index will remain volatile in the future
For the first time in more than 30 years, the yen fell below 155 yen against the US dollar, increasing the risk of reaching a key level that may prompt Japan to enter the market.
On Wednesday, the currency of this Asian country depreciated 0.2% to an intraday low of 155.17, which is the first time that the yen has exceeded 155 against the dollar since June 1990. As of 12:41 p.m. New York time, the yen had fallen back, trading around 155.09.
Win Thin, head of global market strategy of Brown Brothers Harriman, said: "The risk of intervention is still high regardless of the level."
According to the data of the Depository Trust&Clearing Corporation, the factor driving down the yen on Wednesday was the demand for yen against dollar and euro selling contracts. These include buying the $300 million yen option expiring one month later and selling the yen at the price of 156 yen per dollar, which puts pressure on the yen in the spot market.
Japanese officials have repeatedly said that if necessary, they will take necessary actions to deal with the excessive volatility of the yen. The authorities emphasized the speed of Japan's devaluation rather than the precise level of devaluation.
In a tripartite statement last week, the United States, Japan and South Korea said that they would continue to hold close consultations on the development of the foreign exchange market, while acknowledging that Japan and South Korea are seriously concerned about the recent sharp depreciation of their currencies.
Although the Bank of Japan raised short-term policy interest rates for the first time since 2007 in March, the yen has fallen by about 9% so far this year, making it the worst performing currency in the Group of 10. To make matters worse, at a time of growing tension in the Middle East, oil prices may rise, as this may damage Japan's trade balance.
Traders and strategists are looking forward to the end of the Bank of Japan's policy meeting on Friday. Almost all economists surveyed expect that the central bank will keep its monetary policy unchanged.
Piotr Matys, senior foreign exchange analyst at InTouch Capital Markets Ltd., said: "The unexpected interest rate increase will be more meaningful than foreign exchange intervention." Although Matys believes that this is a low probability situation, "the most effective way to stabilize a hard hit currency is to raise interest rates, which surprised the market."
At the same time, the Federal Reserve is preparing to make monetary policy decisions next week, and investors pay close attention to the yield gap between the United States and Japan. The update of the Federal Reserve's PCE will be announced after the decision of the Bank of Japan at its policy meeting on Friday.
Jane Foley, head of foreign exchange strategy at Rabobank, said: "The Ministry of Finance may hope that the Bank of Japan will make some hawkish comments after the policy meeting on Friday." However, if the US PCE performs strongly later that day, it will strengthen the strength of the US dollar. "
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