Analyst: The interest rate differential between Japan and the United States will not prevent the yen from strengthening

Jinshi Data News on September 12, the market expects the start of the Fed’s interest rate cut cycle to be slower than previously expected, but this will not prevent the yen from strengthening against the US dollar. The six-month interest rate swap in Japan has almost returned to the level after the last rate hike by the Bank of Japan, indicating that the market believes that the number of rate hikes in the next six months will be almost the same as at that time. Therefore, it is not a coincidence that the yen reached a high in 2024 on Wednesday. The correlation between the yen and the six-month interest rate swap is the highest in many years. The slight increase in the US core CPI rate has reduced traders’ bets on a Fed interest rate cut. Now traders only believe that the Fed will cut interest rates by 26 basis points in September. However, the total amount of interest rate cuts included in the current easing cycle has increased, and the market believes that the Fed will cumulatively cut interest rates by 244 basis points in the nine meetings ending in September next year. All of this means that even if the interest rate differential between the two countries continues to widen in the coming months, the exchange rate of the yen against the US dollar will continue to rise.