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

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Mars Finance News, 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 currency market multiple times this year, the yen remains near a 40-year low. On Friday, the USD/JPY exchange rate was 161.12, not far from the two-year high previously reached.
The new Federal Reserve Chair Kevin Warsh's hawkish stance continues to boost the dollar, 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.
At the same time, Prime Minister Sanae Takaichi's fiscal spending plans have also raised concerns about Japan's fiscal health. DBS Bank stated that after the Bank of Japan's rate hike this week, yen short positions in the market have not significantly covered, and Japan's tolerance for yen depreciation is nearing its limit.
Market expectations are that when USD/JPY approaches 161.95, the Ministry of Finance may intervene in the currency market again. Meanwhile, CME FedWatch data shows the probability of a 25 basis point rate hike by the Federal Reserve in July has risen to 38.5%, up sharply from 8% a week ago, further reinforcing expectations of dollar strength.
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