Yen slumps to 24-year low against the dollar as Bank of Japan insists it will maintain loose monetary polic
London — World stock markets and oil prices hit the skids on Wednesday as the persistent palpitations about rising interest rates and recessions struck again, while the Japanese yen hit a fresh 24-year low against a seemingly unstoppable US dollar.
As well as compounding the yen’s woes, it knocked the euro down 0.3%, while Norway’s oil-sensitive krone slumped 1.3% and Britain’s pound dropped 0.7% as data confirmed inflation there is now running at a 40-year high of 9.1%. The yield on benchmark US 10-year Treasuries fell to 3.233% while Germany’s 10-year yield dropped 7 bps to 1.692%, after reaching the highest since January 2014 at 1.928% last week.
Investors are continuing to assess the extent to which central banks could potentially push the world economy into recession as they attempt to curb red-hot inflation with interest rate increases. “I think that this recent post-holiday bear market rally is a reflection of the uncertainty that investors have regarding whether we have seen the peak of inflation and Fed hawkishness or not — I think we're close,” said David Chao, Invesco global market strategist for Asia-Pacific.
Most other global central banks are in a similar situation, apart from the Bank of Japan, which last week pledged to maintain its policy of ultra-low interest rates. In contrast, the Czech central bank was expected to hike its rates by 125 bps later with inflation there well into double figures.
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