Yen Depreciation Hits 160.00 Threshold as Interest Rate Differentials Drive Capital Outflows
The USD/JPY exchange rate has reached 160.00, a level not seen in decades. This depreciation is driven by a stark interest rate differential between the Federal Reserve and the Bank of Japan. Investors borrow low-yielding Yen to invest in higher-yielding U.S. Dollar-denominated assets. This shift in capital flows increases selling pressure on the Yen. The Relative Strength Index (RSI) has entered overbought territory, suggesting a potential correction, but momentum is supported by a lack of policy convergence expected before 2025. The current exchange rate puts pressure on Japanese authorities to trigger intervention.
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