The Bank of Japan's rate hike fails to stop the yen's decline, with the yen nearing a 40-year low

BlockBeats news, on June 19, according to Reuters, despite the Bank of Japan raising interest rates last week to the highest level in 31 years and the Japanese Ministry of Finance intervening in the foreign exchange market multiple times this year, the yen remains near a 40-year low against the US dollar. On Friday, the USD/JPY exchange rate was 161.12, not far from the two-year high previously reached.

The new US Federal Reserve Chairman Kevin Warsh's hawkish stance continues to push the dollar higher, while Japan's core inflation has been below the Bank of Japan's 2% target for four consecutive months, weakening market expectations for further rate hikes. Meanwhile, Japanese Prime Minister Sanae Takaichi's fiscal spending plans are also raising concerns about fiscal conditions.

DBS Bank stated that even after the Bank of Japan's rate hike this week, short positions on the yen in the market have yet to be significantly reduced, and Japan's tolerance for yen depreciation is approaching its limit. The market anticipates that when the USD/JPY exchange rate nears the 161.95 level, the Japanese Ministry of Finance may intervene in the exchange rate once again. At the same time, CME FedWatch data shows the probability of the US Federal Reserve raising interest rates by 25 basis points in July has risen to 38.5%, a sharp increase from 8% a week ago, further reinforcing expectations of a strong dollar.