On Tuesday, the Japanese yen dropped to its lowest level against the British pound in 15 years and nine months, marking a significant milestone in the currency markets.
The yen fell to 200.6135 against the pound, reflecting ongoing shifts in global economic conditions and market sentiment.
At 4:26 pm CET, the British pound traded 0.11% higher against the yen, selling for 200.5775.
This increase underscores the pound’s strength relative to the yen, which has been under pressure due to various economic factors.
Factors influencing the yen’s decline
The decline of the yen can be attributed to several factors, including Japan’s monetary policy stance and broader economic conditions.
The Bank of Japan’s continued commitment to maintaining ultra-loose monetary policy, including negative interest rates, contrasts sharply with the monetary tightening seen in other major economies.
This divergence in policy has weakened the yen as investors seek higher returns elsewhere.
Additionally, Japan’s economic recovery from the pandemic has been slower compared to other developed nations, further contributing to the yen’s depreciation.
Supply chain disruptions, coupled with rising energy prices, have also impacted Japan’s economy, exacerbating the yen’s weakness.
British pound’s resilience
Conversely, the British pound has demonstrated resilience, bolstered by the United Kingdom’s relatively robust economic performance and expectations of continued interest rate hikes by the Bank of England.
The UK’s economic outlook has been supported by strong consumer spending and a recovery in business investment, which have helped sustain the pound’s strength against other currencies, including the yen.
The market’s expectations for further interest rate increases by the Bank of England are also playing a role.
Higher interest rates tend to attract investors seeking better returns, thereby increasing demand for the pound. This has contributed to the pound’s appreciation against the yen and other currencies.
This article first appeared on Invezz.com
