The US dollar / yen hit a 20-year high today. If the offshore RMB's rebound against the yen in April can continue, the depreciation of the yen may have more impact on the RMB.

The yen depreciated sharply from March to the end of April. Although many Japanese government officials talked about their "concerns" about foreign exchange fluctuations, the weakening of the yen was seen as beneficial to their policy objectives.

The problem arose when the offshore RMB yen exchange rate reached its highest level since the early 1990s on April 19. In terms of GDP, China and Japan are the second and third largest economies in the world respectively, and the two countries are very close geographically. The impact of the sudden appreciation of the RMB relative to the yen, one of its major trading partners, will lead to the depreciation of the RMB against the US dollar.

When the RMB begins to depreciate against the US dollar, the rise of the US dollar against the Japanese yen will begin to slow down and trade within the seven week range of 126.30 – 131.30. On Monday this week, the exchange rate broke through the upward space, which once again pushed up the RMB / yen exchange rate.

The chart below shows the trend of onshore RMB and offshore RMB against yen and US dollar, as well as the trend of US dollar / yen. Traders will focus on the next upside opportunity of USD / offshore RMB.

This round of yen depreciation was triggered by many factors. The rise in crude oil prices seems to have triggered higher inflation expectations, which once again raised concerns about the path of the Federal Reserve's aggressive interest rate hike, and led to a rise in the yield of U.S. Treasury bonds of different maturities across the board.

The Japanese economy is heavily dependent on imported energy. In addition to crude oil, gasoline, natural gas, heating oil and diesel are becoming more and more expensive. The Bank of Japan has made it clear that it will maintain a very loose monetary policy, including keeping long-term yields low.

All this is related to the trend of the yen, and these fundamentals are difficult to change rapidly. Three weeks ago, in an interview with Bloomberg, former Japanese deputy finance minister ryuke sakhara said he believed that the dollar was expected to rise to 150 against the yen.

The former deputy finance minister was known as "Mr. yen" for his planning of yen intervention during his tenure. He currently expects that the Japanese authorities will not intervene.

If the dollar / yen is to reach the 150 line, it first needs to break through several highs since the beginning of 2002, that is, slightly higher than the 135 line. Looking ahead, Japan's PPI and trade data will be released tomorrow. Investors need to pay special attention to the impact of these data releases on the trend of the yen.