Bitcoin Maintains Weekly Loss as the ‘Anti-Risk’ Yen Gains Following the BOJ Rate Increase.
According to BlackRock, the yen’s widespread use as a funding currency may have a domino effect on other markets, tightening up global financial conditions.
- The Japanese yen hit its highest level since March in relation to the US dollar following the Bank of Japan’s interest rate increase.
- Bitcoin maintains its weekly loss as a rising yen may cause financial tightness on a global scale.
In the international exchange market, the Japanese yen (JPY) gained strength as the Bank of Japan (BoJ) announced additional measures to tighten liquidity and hiked interest rates.
Meanwhile, Bitcoin (BTC) stayed cautious.
The central bank increased its target range for the unsecured overnight call rate from 0% to 0.1 percent to approximately 0.25% in a bold and hawkish move.
It also announced that by the first quarter of 2026, it would reduce its monthly bond purchases, which increase liquidity, to about 3 trillion yen ($20 billion).
The bank was purchasing bonds at a rate of roughly 6 trillion yen per month as of March.
Notwithstanding a weekly loss of 2% due to predictions of additional rate cuts from the US Federal Reserve, Bitcoin remained stable around $66,000. Demand for the “anti-risk” yen increased as a result.
causing the USD/JPY rate to drop to about 150, the highest level for the yen since March, according Trading View’s data. S&P 500 futures increased 0.4%, indicating a positive start to the day on Wednesday.
The low-yielding Japanese yen is used by traders to finance or make investments in assets with high rates of return. Because of this, a significant increase in the value of the yen typically puts pressure on carry trades and compels investors to lower their exposure to riskier assets, such as cryptocurrencies.
In its weekly statement, BlackRock stated that “the yen’s popularity as a funding currency can cause knock-on effects in other markets, helping tighten global financial conditions.”
“The yen’s resulting surge caused investors to unwind positions using the low-yielding yen to buy higher-yielding currencies – what’s known as the carry trade.”
This month, the yen has gained more than 6.4% vs the dollar, the most since November 2022. This could account for some of the current risk aversion in tech stocks and the frequent bullish exhaustion that bitcoin has experienced around $70,000.
The yenmight increase if the Fed issues a strong dovish signal later on Wednesday, paving the way for swift rate cuts. This would increase risk aversion.
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