Japanese Yen slides to 40-year low against U.S. dollar

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Asian currencies are in the midst of a downslide, a pattern further confirmed by the Japanese Yen sliding to a 40-year low against the greenback on Tuesday, according to Bloomberg. Other countries recently affected by downward slides in domestic currency values include the Philippines, Indonesia, and India.

The update comes amid a general downward slide in the value of currencies in Asian markets, regions that primarily are oil-importers and rely on the U.S. dollar to secure supplies critical to the functioning of economies. 

Previous rate hikes have already pushed the short-term borrowing rate for Yen up to 1%, its highest level since 1995. (Source: Bloomberg)

Despite oil prices sinking to the $70 level reflecting pre-U.S.-Iran conflict prices (source: oilprice.com), countries importing oil are still dealing with a somewhat restricted supply of oil that is not in-line with pre-war figures. 

At the time of writing, the U.S. dollar was up against the following currencies, as per Bloomberg data.

• USDEUR: +0.15%
• USDGBP: +0.12%
• USDAUD: +0.12%
• USDHKD: +0.03%
• USDCHF: +0.10%
• USDCAD: +0.11%
• USDJPY: +0.14%

The Japanese government has indicated some level of caution in how it will approach its monetary policy. For decades, the Japanese economy has functioned on a relatively low consumption pattern among households. 

Businesses in Japan generally tend to absorb costs in times of high inflation instead of passing them onto consumers, which means that while inflation may not be felt among consumers, a strengthened U.S. dollar coupled with its scarcity can lead to weakening of the Japanese Yen.

After temporarily rebounding in value from a tech led rally, Asian equity markets is again pricing in uncertainty, with the following indexes priced accordingly according to CNBC. 

• ASX 200: -0.51%
• NIKKEI: +0.86%
• NIFTY 50: -0.05%
• HSI: -0.57%
• SHANGHAI: +0.50%

Summary

Even though oil prices have sunk to pre-war prices, inflation remains an issue for Asian economies due to supply chain gaps for the commodity. The SGFX research desk notes that general sentiment among financial institutions leans hawkish, and current trends suggest rate hikes are likely, though this is not certain.

Research references

• Bloomberg data
• CNBC data
• Japan’s Two-Year Bond Sale Sees Strong Demand on BOJ Caution - Bloomberg
• Morgan Stanley Warns of Oil Glut and Cuts Forecasts on Hormuz - Bloomberg
• Latest Oil Market News and Analysis for June 30 - Bloomberg
• JPY/USD Yen Hits Four-Decade Low in Historic Slide That’s Rattled Japan - Bloomberg
• Japanese yen sinks to 40-year low, keeping intervention risks in focus
• Oilprice.com

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