Yen exchange rate may break out strongly

Recorded on September 18, the exchange rate of the Japanese Yen to the US Dollar was at 141.74 JPY/USD.

The Yen has appreciated 15% against the USD since mid-July. Year-to-date, the Yen is slightly appreciating against the greenback.

The Yen will be in focus this week as the US Federal Reserve (FED) is expected to start cutting interest rates and the Bank of Japan (BOJ) is preparing a roadmap for raising interest rates.

Accordingly, analysts' predictions that the FED will cut interest rates by 50 basis points increased to 67% on September 17 (compared to 30% last week).

Further gains in the yen would come if the Fed eases and the BOJ tightens, pushing the yen above 140 yen per dollar. This scenario could push the yen above corporate expectations for the exchange rate this year, which would in turn fuel corporate buying of yen, further strengthening the currency’s upward trend.

According to the latest update, the context of the trading session on September 18 still revolves around the FED. Although the interest rate futures market shows that the FED may start the policy easing cycle with a 50 basis point interest rate cut.

But there are growing reasons to believe that a 25 basis point cut would be more appropriate for global markets, and some argue that the Fed does not need to ease policy at this point.

According to Bloomberg, the fluctuation of the exchange rate between USD and Yen in the past 3 months was about 12 points, the highest level since March last year, while the fluctuation in the past 1 month was 15 points, the highest since January last year.

Experts say that with the current high level of speculation on the Yen's appreciation, the exchange rate volatility of this currency is likely to remain higher and longer.

Japanese Yen vs US Dollar exchange rate chart, updated September 18. Photo: Investing.com.