Yen Falls to Two Decade Low Against Dollar Amid Ultra-Dovish BoJ Stance

The Japanese yen suffered a debilitating slump in the Asian session on Thursday, as the USD/JPY benchmark pair broke the critical 130 ceiling for the first time in two decades. That said, the forex pair tapped a multi-decade high of $131 a few hours ago.

The worsening yen weakness came as the Bank of Japan (BoJ) rooted its feet firmer in adopting an ultra-loose monetary policy. However, some spectators opine that the BoJ could cut back on its dovish stance a little, considering the intensifying pressure on foreign exchange markets.

BoJ Approved Weaker Yen: Hardman

Commenting on the worsening yen weakness, currency analyst at MUFG Bank Lee Hardman noted that the “BoJ gave the “all clear” to continue selling the yen.”

Notably, the BoJ’s super-dovish stance puts it in contention with the US Federal Reserve, in which markets are pricing in over 150 basis points (bps) rate hikes in its next three meetings.

The policy difference between the two central banks has favored the dollar index (DXY), which jumped to a five-year high of 103.69 this morning.

Meanwhile, other Asian currencies also suffered a similar fate to the yen, with the dollar extending its gains against the Chinese yuan and the CNY/USD pair falling to 0.1512, its lowest point since November 2020.

In other news, the euro fell against the dollar on Thursday, as it fell past a five-year low of 1.0482 in the Asian session today. Today’s EUR decline brings its total losses in April to 5%, its worst monthly decline since early 2015.

The prevalent narrative among spectators is that the single currency could hit parity with the dollar in the medium, a level not seen since 2002. Hardman noted that “It’s certainly looking like a realistic possibility,” explaining that another key support not seen since 2017 is 1.034.