Okay so currency thing happening right now and I not really expert in this stuff but let me try explain what I understand. The dollar getting really strong against Japanese yen. Like really strong. And Japan probably not happy about it.
Right Now Dollar Going Up Up Up
So USD/JPY – that mean how many yen you need for one dollar – it now above 160.40. That highest in like six weeks. So dollar getting stronger, yen getting weaker. When that happen, it mean dollar person very happy, yen person not happy.
Why dollar going up? Because of the war thing with Iran that I already tell you about. When scary thing happen in world, people want dollar. Dollar considered safe. So everybody buy dollar. When everybody buy, price go up. That simple.
But Iran thing not only reason. There other reason too. Interest rate thing. American interest rate still pretty high. Japanese interest rate not high. So people think “okay, I put money in dollar, I get better return.” So they buy dollar instead of yen. When many people do this, dollar price go way up.
Japan Got Problem Now
So here the thing – Japan not want yen to be so weak. When yen weak, Japanese company have harder time. But Japan already try to stop this before and it not really work.
Back in April and May, Japan just spend crazy amount of money trying to push yen back up. They spend like 11.7 trillion yen. That like… $73 billion or something. That huge amount money. They sell dollar, buy yen, try to make yen stronger.
And it work! For little bit. Yen go from 161 to like 155. That pretty good move. But then… market just ignore it. Dollar start going back up again. So Japan spend all this money and yen still go back down. That frustrating probably.
Why Japan Can’t Really Stop This
The problem is interest rate difference. I know I keep talking about interest rate but that really the thing driving everything right now.
When interest rate in America high and interest rate in Japan low, trader just keep buying dollar. Even if Japan sell 73 billion dollar, when interest rate still high in America, people just keep buying. It like trying to hold ball underwater – you push down, it just pop back up.
So Japan could spend another trillion yen trying to push yen up again, but if interest rate in America stay high, it probably not going to work good. Market too strong.
Other Problem Too – Energy And Oil
Japan also have another problem. Japan import most energy from other place, and they buy in dollar. So when oil price go up because of Middle East fighting, Japan need more dollar to buy oil. That make more demand for dollar, so dollar go up more.
So you have three thing happening:
- War making people want safe dollar
- Interest rate in America high, interest rate in Japan low
- Japan need dollar for oil
All three push dollar up, push yen down. Japan fighting against all three at same time. That hard.
Can Japan Do Anything?
So question is – if dollar go even higher, like above 160.70, will Japan try again? They still have like $1 trillion in foreign money they can use. So technically they can do it.
But should they? That different question. Last time they spend 73 billion and it only work for like month. That lot of money for nothing really. So maybe they thinking “why we spend again if it not work?”
Also, if they keep losing these intervention thing, people stop respecting Japan authority. Then yen get even weaker because people think “Japan can’t stop it anyway.” So Japan kind of stuck. They spend money and lose, or they don’t spend money and yen keep going down. Bad choice either way.
What Probably Happen
Honestly? Dollar probably going to keep going up. Unless something really change – like war end, or America cut interest rate, or Japan raise interest rate – nothing really going to stop dollar. Japan probably try intervention again if it go much higher, but it probably not work very good.
That basically where we at. Dollar strong because world scary and American interest rate high. Yen weak because Japan interest rate low and they need dollar for oil. Japan stuck between rock and hard place trying to figure out what do.
Not great situation for anyone who like yen.