Line chart showing the value of the Japanese yen per dollar, dollars per euro, and dollars per pound from January 2018 to December 2023. Foreign currencies weakened versus the U.S. dollar for most of the time frame shown, with some strength in 2020 and again from the fourth quarter of 2022 to the second quarter of 2023. In the third quarter of 2023, the euro, pound, and yen have depreciated versus the dollar. However, the trend returned to foreign currency appreciation in the fourth quarter.
Sources: Bloomberg and Wells Fargo Investment Institute. Daily data from January 1, 2018 to December 31, 2023.
Key Takeaways
- The euro may be contained within recent ranges as a forthcoming recession hits the eurozone hard, as we expect, complicating the European Central Bank’s inflation fight and as expectations that the Federal Reserve has finished its rate hiking campaign have put pressure on the U.S. dollar.
- The yen may have seen its lows as traders will likely respond to intervention on further weakness, but — failing a faster-than-expected policy normalization from the Bank of Japan — it may not see further gains until the U.S. dollar turns lower.