Tencent Financial News According to Bloomberg, former chief economist of the International Monetary Fund (IMF) Ren Yongli pointed out that as the Federal Reserve raises interest rates, the yen will fall to 120 yen against the US dollar in 6 months, but this will be 120 yen against the US dollar. The lowest level it can fall to.
Ren Yongli, now CEO of hedge fund Eurizon SLJ Capital, said the yen will rebound to 100 against the dollar by early 2018 as the Bank of Japan controls yields and increases stimulus through bond purchases. Policy has reached its limit. The central bank already holds more than 40% of local government bonds currently issued. Before launching the bond purchase program in April 2013, the Bank of Japan held 14% of local government bonds.
Last week, in an interview, Ren Yongli said that “the Bank of Japan is closer to the limits of non-traditional monetary policy than any other central bank.” He said that once all options are exhausted, the yen It will rebound to fair value near 90 against the US dollar.
This month, the Bank of Japan bought more than 1.6 trillion yen (about $14.1 billion) of 10-year government bonds in an effort to prevent yields from rising far above the central bank’s target ( 0% up and down).
Bank of Japan Governor Haruhiko Kuroda faces the challenge of suppressing borrowing costs as fast-rising inflation and an improving outlook in some of the world’s largest economies push up global bond yields.
“If the Bank of Japan insists on anchoring nominal interest rates, capital flows will become very strong, and the impact of the dollar against the yen will lead to other distortions and policy responses from other countries,” said Ren Yongli, ” The 0% interest rate target will be used and adjusted just as the Fed is adjusting the federal benchmark rate and the European Central Bank will cut it.”
Year to date, the yen has gained 3% against the dollar. New US President Donald Trump has accused Japan of devaluing its currency to gain a trade advantage. This month, during Japanese Prime Minister Shinzo Abe’s visit to the United States, Trump did not attack Japan’s monetary policy. Last quarter, the yen plummeted 13%. Meanwhile, the dollar climbed on bets that Trump’s tax cuts and infrastructure spending plans will prompt the Federal Reserve to accelerate interest rate hikes. As of 8:25 a.m. on the 21st, the Japanese yen closed at 113.22 against the US dollar.
Ren Yongli pointed out that with the Federal Reserve likely to raise interest rates three times this year, the yen will resume its decline in the next few months. Derivatives traders see a 75% chance that the Federal Reserve will announce a rate hike at its June monetary policy meeting. (Translation/Mina) <!–
