U.S. bonds brace for impact of Japan’s currency moves (2024)

FAQs

Why is USD strengthening against JPY? ›

The primary driver of USD/JPY is the interest rate differential over time. The yen longs are likely more reliant on additional Fed rate cuts to be priced into the market rather than the BoJ quickly hiking rates.

Japan is the world's largest foreign holder of Treasuries, but its footprint in the Treasuries market is tiny compared to what it once was. According to Treasury International Capital figures, Japan held $1.17 trillion in U.S. Treasury securities at the end of February.

Why is the yen falling? The value of a country's currency rises and falls relative to currencies elsewhere in line with the laws of supply and demand. At the moment, investors are being driven to offload the yen due to a yawning gulf in interest rates between Japan and the United States.

TOKYO -- The yen's sharp appreciation Monday after crossing the 160 mark against the dollar has triggered speculation that Japanese authorities intervened in the market to shore up their home currency. The yen has weakened in recent months, fueling concerns over the potential impact on import prices and inflation.

Traditionally, exporters welcome a weaker yen as it boosts income from exports paid for in dollars and other foreign currencies. Companies that mostly rely on the domestic market or depend heavily on imports suffer from higher costs.

Exchange Rates

A favorable exchange rate can make a country's goods cheaper for foreign buyers and thus more competitive in the global market. Conversely, when a currency appreciates, as in the U.S. dollar against the Japanese yen, American goods become relatively more expensive for Japanese consumers.

Nearly half of all US foreign-owned debt comes from five countries. All values are adjusted to 2023 dollars. As of January 2023, the five countries owning the most US debt are Japan ($1.1 trillion), China ($859 billion), the United Kingdom ($668 billion), Belgium ($331 billion), and Luxembourg ($318 billion).

Among other countries, Japan and China have continued to be the top owners of US debt during the last two decades. Since the dollar is a strong currency that is accepted globally, holding a substantial amount of US debt can be beneficial.

The largest holder of U.S. debt is the U.S government. Which agencies own the most Treasury notes, bills, and bonds? Social Security, by a long shot. The U.S. Treasury publishes this information in its monthly Treasury statement.

Dive into the factors behind the yen's decline: Japan's near-zero interest rates, a massive balance sheet, economic growth disparities with the US, and global currency dynamics. Here's what it could mean for JPY pairs.

Will the yen get stronger in 2024? ›

The median prediction in a Bloomberg survey is for the currency to finish 2024 at 140 per dollar, just 5% stronger than the current level. “The balance of risk is tilted towards a weaker yen than we are projecting,” HSBC Holdings Plc analysts including Paul Mackel, global head of FX research, said in a note this week.

Introduced in 1871, the Japanese yen (Japanese: 円), or JPY, is the official currency of Japan. The symbol of the yen is ¥, along with JP¥, which is sometimes used to separate the Japanese yen from the Chinese yuan renminbi, which shares the same symbol.

Most cans of pop are 100 yen. For special imported stuff you might pay 120-150 yen. Pretty standard price really, not expensive.

The highest-valued currency in the world is the Kuwaiti Dinar (KWD). Since it was first introduced in 1960, the Kuwaiti dinar has consistently ranked as the world's most valuable currency. Kuwait's economic stability, driven by its oil reserves and tax-free system, contributes to the high demand for its currency.

USD/JPY Mid-Day Outlook

Intraday bias in USD/JPY remains neutral and outlook is unchanged. On the upside, above 157.78 will resume the rally from 151.86, as the second leg of the corrective pattern from 160.20, to 100% projection of 151.86 to 156.78 from 153.59 at 158.51.

USD/JPY represents the currency exchange rate for the U.S. dollar and the Japanese yen. The USD/JPY currency pair has traditionally had a close correlation with U.S. Treasuries. When interest rates head higher, Treasury bond prices go down, which lifts the U.S. dollar, strengthening USD/JPY prices.

Longforecast, a reputable financial technology firm renowned for its expertise in providing comprehensive price forecasting data, particularly through technical analysis, has projected that the USD/JPY exchange rate will range between 151 and 175 in 2024.