Yen plunged to its lowest against the U.S. dollar in more than two decades since June 15. Previously, the decline of Yen had emerged in April for 12% against the U.S. dollar and around 8% against the Indian rupee. Indian Railway Finance Corp, a state-owned corp closed $967m of its green financing. This is the largest and syndicated offshore loan in two decades. The company however decided to enter Yen plus long maturities of seven to ten years.
The managing director of Indian Railway Finance Corp, Amitabh Banerjee delivered the announcement. The announcement marked the market conditions of the U.S. dollar offshore debt market that was not conducive compared to a few months before. This is because of the volatility as well as the increased interest rates expectations from the Fed. These factors have driven the uncertainty in tapping the offshore yen market which should be stable.
It seems like Indian Railway Finance Corp would go on to borrow in the Japanese Currency. But the latest condition shows that the yen hit a 24-year low. Even the Bank of Japan bucked the global monetary tightening trend due to the Fed raising the benchmark overnight on interest rate. This is as much as 75bp. So the Bank of Japan might stick to the stance although there is interest rate tightening. The firm finds that borrowing in yen might be potential although the currency might be weak.
Indian Railway Finance Corp have valued yen as it has provided the long tenor the company needs to improve the profile of assets. Furthermore, it finances the acquisition of rolling stock, the leasing of railway infrastructure assets for as long as 15-30 years. For the fiscal year in 2023, IFRC has the task to get $8.5bn to meet the capital expenditures.