Last week's exchange rate market showed some rare scenes...

 

 -- The U.S. dollar last week ushered in the sharpest weekly decline this year, while non-U.S. currencies rose all together, with the Japanese yen leading the way!

 

Right! You read that right, it is the yen!

 

The morning of March 8, the appreciation of the yen caused widespread concern in the market. Not only the yen against the US dollar once soared to 1 dollar to 146 yen, the yen against the Chinese yuan rose nearly 2% during the week!

 

Source: Sina Finance

 

So it seems, the yen is really having it’s day!

 

It is no wonder that many friends exclaimed: "Is yen finally rising to the occasion?!"

 

Panda found that the yen's surge last week was mainly affected by the following two aspects:

 

 

Japan's interest rate is about to increase?

 

With the Bank of Japan March monetary policy meeting is approaching, discussion about "whether the end of the negative interest rate policy is coming" gets more and more intense.

 

Bank of Japan Governor 植田和男（うえだかずお）said last Thursday that the possibility of achieving the 2% inflation target is gradually rising. If the price target can be achieved in a sustained and stabilized manner, the Bank of Japan will consider modifying the large-scale monetary easing policy, including negative interest rate policy and yield curve control framework.

 

Source: Reuters

 

On March 8, Reuters cited four sources familiar with the Bank of Japan's thinking, saying that a growing number of BOJ policymakers are leaning toward ending negative interest rates this month because they expect strong results from wage negotiations this year.

 

The simple understanding is that signs point to a strong possibility that a rate hike in Japan is about to begin!

 

And a yen rate hike would push up yields on Japanese bonds, which to some extent could attract funds back to Japan from foreign assets such as U.S. bonds and promote yen appreciation.

 

Therefore, the market is bidding more on the Bank of Japan making action in the March meeting, which supports the yen’s rising.

 

Federal Reserve is creating an atmosphere of interest cut

 

Meanwhile, the US Non-farm Payrolls released on March 8 also made a contribution to the yen rise.

 

On last Friday, the U.S. Bureau of Labor Statistics released data showing that the U.S. non-farm payrolls increase in February was 275,000 people, again higher than the expected 200,000 people increase, higher than the average 230,000 people increase over the past 12 months.

 

However, despite faster job growth, the unemployment rate and wage growth showed signs that the labor market was cooling. The unemployment rate unexpectedly rose from 3.7% to 3.9%, while wage growth fell to 0.1%, below 0.6% and well below the forecast of 0.3%.

 

The US dollar index continued to weaken after the release of the data...

 

This comes after Fed Chairman Powell said that the Fed will soon cut rates if inflation continues to move lower. With wage growth pressures easing, inflation is more likely to remain low.

 

The softened U.S. non-farm payrolls data and Fed Chairman Powell's dovish statement together drove the dollar interest rates and exchange rates both lower. The market’s expectation on the Fed's rate cut in June reached up to 80%, which further pushed the yen to rise.

 

No matter what, this wild ride of yen is indeed unexpected to many friends. Those who did not get some yen regret not starting earlier, and those who got some yen regret not getting enough. For friends working and living in Japan, if you need to remit money to your home country, seize the opportunity and action now!

 

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