Japanese Yen Falls as Traders Seek to Benefit from Interest Rate Divergence

The yen has fallen to new lows against the euro, British pound, and other currencies this week, heading towards its fourth consecutive weekly decline against the dollar.

Investors are seeking better returns almost everywhere except in Japan, where interest rates will remain near zero for some time.

The yen has depreciated by 6.4% against the dollar since the beginning of the year. It also dropped by 0.6% against the euro this week, reaching its lowest level in three months overnight at 163.45 for the euro.

Similarly, it decreased by the same margin against the pound to its lowest level since late 2015 at 190.83.

The movements of the yen against the dollar were more modest, amid the possibility that its decrease could lead to authorities intervening in the markets.

The dollar increased by 0.1% to trade at 150.41 yen this week. Movements were limited in the early hours of Friday in Asia.

Investors can take advantage of interest rate differentials through what is known as carry trading, by borrowing in a currency at close to zero percent interest and purchasing assets that yield income in other currencies.

reuters