The Japanese central bank has put the country in a tricky situation with its low interest rate policy.
(Photo: Reuters)
Frankfurt The Japanese yen hit a two-month high against the US dollar on Tuesday. Short sellers cleared bets against the Japanese currency. Since the beginning of the year, it has lost around 13 percent against the dollar and around three percent against the euro.
Experts attribute the weakness primarily to increased interest rate differentials between Japan and the rest of the world. Many central banks have raised interest rates in view of the rising inflation – on the other hand, the currency watchdogs in Japan are still pursuing an ultra-loose course.
This tends to weaken the yen because it makes it more attractive for international investors to allocate capital outside of Japan. However, the bearish sentiment towards the yen could turn around.
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