Market observers argue that the greenback will maintain its momentum as more traders anticipate the Federal Reserve to hike interest rates 25 basis points in December .The yen has been in peril since the U.S. presidential election last month.
“On Election Day in the U.S., it took 105 yen to buy one dollar. Recently, it took JPY114. That’s a sharp move for developed-market currencies, and one that suddenly makes Japanese goods cheaper for overseas buyers,” reports Jack Hough for Barron’s.
Earlier this year, the Bank of Japan extended its stimulus measures, supporting Japanese equities and country-specific exchange traded funds. As part of its expanded stimulus plan, The BOJ decided to increase ETF purchases so its total holdings rose at an annual pace of ¥6 trillion, or $58 billion, up from the current ¥3.3 trillion, Reuters reports.
“A cheap yen won’t make life easier for Japanese consumers, for whom purchases of many imported goods will become more expensive. But it will give a quick boost to exporters, which have a large weighting in the country’s economy and stock market. At the same time, the Bank of Japan is purchasing shares, and profit margins are low but rising, fueling brisk profit growth,” according to Barron’s.
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CORRECTION: Japan currency-hedged ETF options