The yen falls to a new 24-year low against the US dollar

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  • Japanese PM says BoJ should maintain ultra-accommodative monetary policy
  • Euro up after ECB opens door for bigger rate hike in September
  • Pound gains after hawkish comment from BoE official

NEW YORK/LONDON, June 21 (Reuters) – The Japanese yen plunged against the U.S. dollar on Tuesday to its lowest level since October 1998, as the Bank of Japan’s ultra-loose monetary policy contrasted sharply with an aggressive Federal Reserve determined to eradicate galloping inflation.

The yen fell to a fresh 24-year low of 136.455 to the dollar, extending losses that have already seen it lose more than 18% of its value against the greenback this year.

Colin Asher, senior economist at Mizuho, ​​said the yen’s movements appeared to be mostly flow-driven.

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“The dollar broke the former high at 135.60 yen and triggered stops taking it through the high figure at 136.0 and beyond,” Asher noted.

“The logic is the same as last week and the week before and the week before: the BoJ will be the last of the G10 to rise, the Fed picks up the pace and (there is) a wider yield gap “, he added. .

The yen lost further ground after the BoJ dashed any expectations of a policy shift on Friday and continued to stand out among other major central banks in its commitment to ultra-loose monetary settings. Read more

Instead, he stepped up his bond buying to keep 10-year yields within a targeted range of 0% to 0.25%. But despite his efforts, the yield remains at the upper end of this target.

Earlier in the day, Japanese Prime Minister Fumio Kishida effectively gave the green light to selling the yen when he said the BoJ should maintain its ultra-loose monetary policy.

In afternoon trading, the yen was at 136.20 yen per US dollar, just off the 24-year low. The yen also fell 1.3% to 143.78 per euro, its lowest since June 9.

The yen lost more than any other major currency against the greenback as the BoJ’s dovish policy stance deviated from the general hawkish policy of global policymakers.

fall of the yen

In other currencies, the dollar index was little changed at 104.41, but was broadly supported by expectations of big rate hikes at upcoming Fed meetings.

Richmond Fed Chairman Thomas Barkin added to the US central bank’s hawkish rhetoric on Tuesday, saying Fed Chairman Jerome Powell’s forecast of a 50 or 75 basis point rate hike in July were “reasonable”. Read more

Earlier, the dollar tumbled after data showed US existing home sales fell to a two-year low in May as prices hit a record high and mortgage rates fell further. increased, driving entry-level buyers out of the market. Read more

The Euro, on the other hand, was firmer at $1.0529, up 0.2%. It rose after European Central Bank chief economist Philip Lane said the ECB would raise rates by 25 basis points at its July meeting, but the extent of its September hike remains to be seen. determine, suggesting that a bigger hike of 50 basis points is possible.

The pound also rose against the dollar, rising 0.4% to $1.2290 on hawkish comments from Bank of England policymakers.

BoE chief economist Huw Pill said on Tuesday that the central bank would have to raise rates further to combat soaring inflation. Read more

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Currency bids at 3:02 p.m. (7:02 p.m. GMT)

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Reporting by Samuel Indyk in London and Gertrude Chavez-Dreyfuss in New York; Additional reporting by Sujata Rao in London; Editing by Jonathan Oatis

Our standards: The Thomson Reuters Trust Principles.

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