TOKYO, Sept. 1 (Xinhua) -- The Japanese yen plunged to a fresh 24-year low against the U.S. dollar in Tokyo on Thursday, as remarks by a U.S. Federal Reserve official backing aggressive rate hikes into next year stoked fears of a widening gulf in interest rates between Japan and the United States.
The yen dropped to the upper 139 level against the dollar at one point Thursday, marking its lowest level since September 1998.
The yen was sold for the U.S. dollar, analysts here said, following Cleveland Fed President Loretta Mester saying on Wednesday that the Fed should hike its key interest rate to above 4 percent by early next year.
The median market consensus for rate hikes as part of the Fed's aggressive monetary policy to tame inflation that is up to 4 percent, from current levels of between 2.25-2.5 percent, analysts explained.
Mester also remarking she does not "anticipate the Fed cutting the Fed funds rate target next year," echoed those of New York Federal Reserve Bank President John Williams recently also backing aggressive hikes into next year, in stark contrast to the Bank of Japan's (BOJ) policy.
While the Fed and, most likely, the European Central Bank next week, raise their rates to tame inflation, the BOJ has stayed committed to its ultra-loose monetary policy, setting its short-term benchmark interest rates at minus 0.1 percent, while continuing to guide 10-year Japanese government bond yields to around zero percent.
The BOJ's dovish policy stance has seen interest rates between Japan and the United States widen, which has triggered dollar buying and the yen's weakness, as well as caused volatility in the stock market here, analysts have said.
The yen's rapid drop on Thursday once again sparked concern from the government here which warned the depreciation of the yen and rapid movements of foreign exchange rates are "undesirable."
"Currency rates should move stably, reflecting economic fundamentals. The government is watching foreign exchange market moves with a high sense of urgency," Japan's top government spokesperson Chief Cabinet Secretary Hirokazu Matsuno told a press conference. ■
