Line chart showing the value of the Japanese yen per dollar, dollars per euro, and dollars per pound from January 2018 to March 2024. 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 March 31, 2024.
Key Takeaways
- The euro may fall from recent ranges on a questionable eurozone economic environment, complicating the European Central Bank’s inflation fight, and as expectations that the Federal Reserve will cut rates significantly less than initially expected have supported the U.S. dollar.
- The yen seems unlikely to rise from its lows as traders have responded to less-than-stellar policy normalization from the Bank of Japan. The yen may drop significantly if interest rate differentials remain elevated.