THE yen hit its lowest level against the dollar in two decades today, extending recent falls as the gap widens between Japan’s ultra-loose monetary policy and Fed tightening.

Despite being traditionally considered a safe-haven currency, uncertainty fuelled by Russia’s war in Ukraine has not strengthened the yen.

Instead, moves by the United States Federal Reserve towards a more aggressive monetary policy and shock of rising oil prices in Japan – a major importer of fossil fuels – has pushed the currency lower, said analysts.

One dollar (RM4.23) bought 126 yen (RM4.22) at around 0630 GMT today, the lowest rate since 2002.

“The Japanese yen has been one of the weakest currencies anywhere in the world this year,” said Dutch banking group ING in a commentary published last week.

“Driving the rally has been the perfect storm of a hawkish Federal Reserve, a dovish Bank of Japan, and Japan’s negative terms of trade shock as a major fossil fuel importer.”

The yen had already lost 10% of its value against the dollar in 2021, after four years of strengthening.

Japanese Prime Minister Fumio Kishida did not comment directly on the fall when asked about it yesterday, but emphasised the importance of stability in foreign exchange rates.

“I will refrain from commenting on the level of exchange rates, but their stability is important and I think rapid fluctuations are undesirable.” – AFP, April 13, 2022.