This might suggest that the yen-dollar rate has already overshot.
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Lately, many have been fixated on the recent weakness in the yen, as the dollar-yen rate has recently risen from around 75.5 yen to the dollar to 93.5.
However, the Americans, at the other end of the yen-dollar exchange rate, do not necessarily see things this way.
Even with global risk sentiment becoming less of an issue, dollar and yen rate differentials are expected to favor the greenback.
This year has been no exception, with the dollar-yen rate barely moving.
Put simply, the dollar-yen exchange rate has been artificially depressed because of a gigantic repatriation of Japanese investments from Europe and the U.S. The dollar will soon soar higher.
We are evaluating ways to potentially mitigate the impact of any further weakening in the yen-to-dollar exchange rate.
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The chart above shows that in 1980, the rate was 270 yen per dollar.
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The long-term chart of the exchange rate shows that it is barely a blip, as the long-term downtrend (line a) goes back to 1976, when the rate was 305 yen per dollar.
After April, Mr. Takeuchi says the impact of a weaker currency will start to be felt, boosting Japanese earnings by around 15% based on the yen's current exchange rate against the dollar and the euro.
With Japan closed, the next catalyst for the exchange rate between the dollar and the yen could be the Federal Reserve's policy meeting.
The next potential catalyst for the exchange rate between the dollar and the yen will come from the U.S., where nonfarm payrolls data will be released after Asian markets close.
The next potential risk event for the exchange rate between the dollar and the yen could be the Group of 20 finance ministers meeting in Washington set to commence later, where it's possible that representatives of other countries could express their view on Japan's quantitative easing program and its potential impact on the global economy.
These interest-rate expectations work in favour of the dollar and against the yen.
An interest-rate gap is opening between currencies like the dollar and the yen on the one hand, where monetary policy is likely to remain ultra-loose, and higher-yielding ones like the euro on the other.
The yen has lost about 20% of its value against the US dollar since October, helping Japanese firms to convert overseas profits back into yen at a more favourable rate.
The emergence of a weak target exchange rate implies a more internationalized yen, which is another variable in arresting excessive appreciation of the dollar.
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