The value of the yen has fallen to its lowest level in nearly 40 years, while the won continues to strengthen, leading to a two-year low in the won-yen exchange rate. As the decoupling between the won and yen deepens, attention is focused on its impact on domestic companies' price competitiveness and the financial market.
According to financial sources on July 24, the yen's exchange rate against the U.S. dollar was recorded at 163.785 yen, up 0.71 yen from the previous trading day as of 3:30 PM.
On July 23, the yen reached as high as 163.986 yen during trading, marking its highest level since December 1986, a span of 39 years and 7 months. Considering that the yen-dollar exchange rate was around 75 yen in 2011, the yen's value has effectively halved in 15 years.
Amid rising international oil prices due to geopolitical risks surrounding Iran, assessments indicate that the Japanese government's response has remained limited to verbal interventions, failing to curb the yen's decline. Concerns over deteriorating fiscal health due to the Takaiichi administration's expansionary fiscal policy have increased, and despite the Bank of Japan raising its policy interest rate to 1% last month, the gap with the U.S. benchmark rate (3.50-3.75%) remains significant, sustaining pressure on the yen.
Kim Yu-mi, a researcher at Kiwoom Securities, explained, "Despite the Japanese authorities' caution regarding foreign exchange market interventions, expectations persist that the interest rate gap with the U.S. will remain for the time being, leading to a weaker yen against the dollar."
In contrast, the won is showing strength. On July 24, the won-dollar exchange rate fell to 1,466.6 won, marking its lowest level in about two and a half months since May 7 (1,454.0 won) based on weekly closing prices.
Typically, the won and yen move in the same direction, and until last month, both currencies exhibited weakness. However, this month, a clear decoupling phenomenon has emerged. In fact, the won has shown the strongest performance among the G20 currencies. From the beginning of this month until July 24, the won's value against the dollar has risen by 6.24%, the highest increase among major currencies.
In South Korea, a significant inflow of dollars due to SK Hynix's American Depositary Receipt (ADR) listing is driving the won's strength. SK Hynix has been gradually converting approximately $26.5 billion raised from its Nasdaq listing and bringing it into the country, which has also led to an increase in dollar selling by domestic exporters.
As the won strengthens and the yen weakens, the won-yen exchange rate fell to 889.83 won per 100 yen on July 24, the lowest level in two years since July 2024. This has raised concerns that the increase in demand for yen tech and travel to Japan could widen the service account deficit, potentially hindering domestic recovery.
Looking ahead, fluctuations in the yen's value could have significant repercussions in international financial markets. If the yen continues to weaken, it may trigger a rise in Japanese government bond yields, impacting the global bond market.
Park Sang-hyun, a researcher at iM Securities, stated, "While the super weak yen phenomenon may not immediately pose a threat to the financial market, increased volatility in the yen-dollar exchange rate could burden both the financial and asset markets. Further weakness in the yen could lead to rising Japanese government bond yields, which may also exert pressure on U.S. and global bond yields."
He added, "Conversely, if the Japanese government intervenes directly to prevent the yen's decline, a rapid strengthening of the yen could alter global capital flows, increasing asset price volatility."
According to financial sources on July 24, the yen's exchange rate against the U.S. dollar was recorded at 163.785 yen, up 0.71 yen from the previous trading day as of 3:30 PM.
On July 23, the yen reached as high as 163.986 yen during trading, marking its highest level since December 1986, a span of 39 years and 7 months. Considering that the yen-dollar exchange rate was around 75 yen in 2011, the yen's value has effectively halved in 15 years.
Amid rising international oil prices due to geopolitical risks surrounding Iran, assessments indicate that the Japanese government's response has remained limited to verbal interventions, failing to curb the yen's decline. Concerns over deteriorating fiscal health due to the Takaiichi administration's expansionary fiscal policy have increased, and despite the Bank of Japan raising its policy interest rate to 1% last month, the gap with the U.S. benchmark rate (3.50-3.75%) remains significant, sustaining pressure on the yen.
Kim Yu-mi, a researcher at Kiwoom Securities, explained, "Despite the Japanese authorities' caution regarding foreign exchange market interventions, expectations persist that the interest rate gap with the U.S. will remain for the time being, leading to a weaker yen against the dollar."
In contrast, the won is showing strength. On July 24, the won-dollar exchange rate fell to 1,466.6 won, marking its lowest level in about two and a half months since May 7 (1,454.0 won) based on weekly closing prices.
Typically, the won and yen move in the same direction, and until last month, both currencies exhibited weakness. However, this month, a clear decoupling phenomenon has emerged. In fact, the won has shown the strongest performance among the G20 currencies. From the beginning of this month until July 24, the won's value against the dollar has risen by 6.24%, the highest increase among major currencies.
In South Korea, a significant inflow of dollars due to SK Hynix's American Depositary Receipt (ADR) listing is driving the won's strength. SK Hynix has been gradually converting approximately $26.5 billion raised from its Nasdaq listing and bringing it into the country, which has also led to an increase in dollar selling by domestic exporters.
As the won strengthens and the yen weakens, the won-yen exchange rate fell to 889.83 won per 100 yen on July 24, the lowest level in two years since July 2024. This has raised concerns that the increase in demand for yen tech and travel to Japan could widen the service account deficit, potentially hindering domestic recovery.
Looking ahead, fluctuations in the yen's value could have significant repercussions in international financial markets. If the yen continues to weaken, it may trigger a rise in Japanese government bond yields, impacting the global bond market.
Park Sang-hyun, a researcher at iM Securities, stated, "While the super weak yen phenomenon may not immediately pose a threat to the financial market, increased volatility in the yen-dollar exchange rate could burden both the financial and asset markets. Further weakness in the yen could lead to rising Japanese government bond yields, which may also exert pressure on U.S. and global bond yields."
He added, "Conversely, if the Japanese government intervenes directly to prevent the yen's decline, a rapid strengthening of the yen could alter global capital flows, increasing asset price volatility."
* This article has been translated by AI.
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