Financial encyclopedia

After the meeting on interest rates, the Bank of Japan maintained an ultra-loose monetary policy. The yen's new low in seven months is certainly exciting for many Hong Kong people who are going to visit Japan, but why did the yen depreciate? There are three main reasons:

monetary policy
Under the influence of loose monetary policies such as QQE (quantitative qualitative monetary easing with negative interest rate) and YCC (yield curve control), a large amount of funds flowed to the market, which led to the important reason why the yen was easy to depreciate and difficult to rise in the past 10 years.

margin
For the foreign exchange market, one of the most important reasons that affect the strength of the exchange rate is the spread between the two countries. Since 2022, the FED has raised interest rates six times, with a cumulative increase rate of 375 basis points. The higher the interest rate in the United States, the more attractive the interest rate products will be, and more money will be attracted. However, Japan still hopes to maintain a loose monetary policy to promote inflation, which leads to the continuous widening of the spread between the United States and Japan and the depreciation of the yen.

Capital flow direction
CFTC will announce every week the investors' open positions in yen futures (Chicago and New York Futures Exchange) last week. If it is less than 0, it means that the market is generally bearish on the yen, and vice versa. Although the scale is not large enough to affect the trend of the yen, yen investors will use this data as a basis for operation, and then form an expected psychological impact on the future.  

Has the yen fallen to the end? We need to pay attention to whether Japan continues to be loose, whether the United States continues to raise interest rates, and whether the trade deficit increases.