The Japanese yen is the weakest against the dollar in a quarter of a century. Investors are betting on a US rate hike

Japanese yen

The US dollar continues to enjoy investor interest. While it is strengthening, other countries’ currencies are weakening. The Japanese yen hit its lowest level against the US dollar since October 1998, almost a quarter of a century ago.

The US dollar reached 135.22 yen during Monday’s trading. This is the most since October 1998. The record fall of the yen against the dollar is mainly due to investors’ expectations that the US central bank will continue to tighten monetary policy. And quite possibly on a larger scale than previously thought.

FED is increasing interest rates

On Friday, the US Bureau of Labor Statistics published data on May inflation, which surprisingly jumped to 8.6 percent year-on-year. This is what has heightened investors’ expectations that the Fed will proceed to a significantly larger interest rate hike.

BOF is buying Japenese government bonds

However, the Japanese yen is not helped by the monetary policy of the Bank of Japan, which, unlike the Fed, is rather dovish. The Bank of Japan has announced that it is prepared to buy around $3.7 billion of Japanese government bonds, which means it wants to keep its benchmark interest rate unchanged at 0.25 percent.


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