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Yen falls to lowest level since 1998 as U.S. yields march higher

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© Reuters. FILE PHOTO: Japanese Yen and U.S. Dollar notes are seen in this June 22, 2017 illustration photo. REUTERS/Thomas White/Illustration//File Photo

By Alun John

HONG KONG (Reuters) – The yen tumbled to its lowest against the dollar in 24 years on Monday, as the gap between Japanese and U.S. benchmark yields widened after red hot U.S. inflation data drove U.S. Treasury yields higher.

The dollar rose as high as 135.22 yen, its highest since October 1998, having gained for each of the past seven sessions, as the policy divergence between hawkish central banks overseas and the dovish Bank of Japan (BOJ) becomes ever more apparent.

Central banks’ efforts to raise interest rates to curtail inflation will remain in focus this week. The Federal Reserve and the Bank of England are expected to raise rates at their meetings and there is a chance the Swiss National Bank will do the same.

Little change is expected from the BOJ, however, which said on Monday it would buy 500 billion yen ($3.70 billion) of Japanese government bonds on Tuesday as part of its policy to keep benchmark 10-year yields within 0.25 percentage points of its 0% target.

In contrast, the benchmark U.S. 10-year yield touched 3.2% early on Monday, having gained nearly 12 basis points on Friday.

The U.S. two-year yield extended Friday’s gains to touch 3.194%, its highest since late 2007. [US/]

U.S. inflation beat expectations on Friday driving bets that the Fed will have to raise rates even more aggressively. Market pricing indicates roughly a two-thirds chance of at least 125 basis points of increases across the Fed’s next two meetings – on Tuesday and Wednesday this week and in July – according to the CME’s FedWatch tool.

That implies at least one increase of 75 basis points, which would be the biggest single-meeting raise since 1994.

Higher energy prices have also hurt Japan’s balance of payments, weighing on the yen.

“For the yen, what could go wrong did go wrong, and continues to go wrong,” said Paul Mackel global head of FX research at HSBC, adding it was important to watch whether Japanese investors were prepared to take more unhedged currency risk in their portfolios.

“The big thing now is whether the domestics begin to change their so-called FX hedge ratio, which could lead to more persistent demand for foreign exchange versus Japanese yen. If so, that keeps the currency on a weakening path, or at least stops it strengthening.”

Monday’s declines follow a short-lived yen rally late on Friday when Japan’s government and central bank said they were concerned by its recent sharp falls, a rare joint statement seen as the strongest warning to date that authorities could intervene to support the currency.

Expectations of a more hawkish Fed are pushing up the dollar against more than just the yen. The dollar index, which tracks the greenback against six peers, was 0.3% higher at 104.58, its highest in four weeks.

The euro was languishing at $1.0490, down 0.23%, and sterling was 0.23% lower at $1.2287, taking little support from expectations the Bank of England will raise rates on Thursday, which would be its fifth increase since December.

The Swiss National Bank also meets Thursday, and a 25 basis point increase is on the cards.

The risk-friendly Australian dollar lost as much as 0.6% falling to $0.6998, a three-and-a-half week low, as fears about the impact of higher rates drove investors to perceived safer assets.

Similarly bitcoin, also a so-called risk asset, was under pressure and dropped to a new 18-month low of $24,888, as cryptocurrency lending firm Celsius Network said it would pause withdrawals and transfers between accounts due to “extreme market conditions”.

($1 = 135.0200 yen)

Economy

South Korean exports dropped 14% in November, the highest in 2.5 years

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exports South Korea

South Korea’s exports fell 14 percent year-on-year to $51.91 billion in November, preliminary data from the Ministry of Commerce, Industry and Energy showed. The November drop was the biggest in 2.5 years since May 2020 and was caused both by the deteriorating global economy, which even a Google price chart showed, and a truckers’ strike in the country.

South Korea exports 2022 – reasons for the drop

Exports fell for the second month in a row. Analysts on average expected an 11% decline, according to Trading Economics. Respondents to MarketWatch predicted a 10.5% decline.

Shipments of semiconductor products overseas, the country’s top export item, fell 29.8%; petrochemicals fell 26.5% and steel exports fell 10.6%. Meanwhile, exports of automobiles jumped 31% and petroleum products 26%.

Exports to China, South Korea’s largest trading partner, fell by 25.5%, and to Asian countries – by 13.9%. Below, supplies to the USA grew by 8% and to the European Union – by 0.1%.

In January-November exports rose by 7.8% on the same period last year and reached a record $629.1 billion.

South Korean imports rose 2.7% to $59.2 billion in November, marking the 23rd consecutive month of gains, but the current rate of growth is the lowest since November 2020. Experts had predicted an increase of only 0.2%.

South Korea’s trade deficit last month was $7.01 billion, compared with a surplus of $2,973 billion a year earlier.

The negative balance was recorded for the eighth month in a row. As a result, by the end of 2022, the country may record a foreign trade deficit for the first time since the financial crisis in 2008.

Earlier we reported that the UN estimates the cost of humanitarian aid in 2023 at a record $51 billion.

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The UN estimates humanitarian aid costs in 2023 at a record $51 billion because of an impending humanitarian crisis

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a humanitarian crisis

Joint humanitarian operations will require a record $51.5 billion in 2023 to address urgent problems.

The UN Office for the OCHA estimates that 339 million people will need urgent aid in 2023. At the same time, OCHA called on donor countries to provide funds for assistance in 2023 to the 230 million people most in need, living in 68 countries.

Griffiths explained that aid is needed not only for people experiencing conflicts and disease outbreaks. but also for those suffering the effects of climate change, such as people in peninsular Somalia facing drought and those in Pakistan experiencing severe flooding. For the first time, the growing humanitarian crisis has brought the number of displaced people worldwide to the 100 million mark. Also worsening an already bad situation is the worldwide coronavirus pandemic, which affects the poor. Note that the general economic crisis has begun to negatively affect even the Netflix price chart.

Earlier we reported that house prices in the UK fell by 1.4% in November.

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Economy

Average house prices in the UK fell 1.4% in November

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average house prices in the uk

Average house prices in the UK fell 1.4% in the previous month in November to 263,788 thousand pounds (about $319,000), according to the British mortgage company Nationwide Building Society.

The decline was recorded at the end of the second consecutive month and was the most significant in almost 2.5 years – since June 2020. Analysts on average had forecast a decline of only 0.3%, according to Trading Economics.

Are house prices in the UK going to fall even more?

Residential real estate prices in November compared to the same month last year increased by 4.4%. At the same time, experts expected a larger increase of 5.8%. The growth rate slowed down significantly compared with 7.2% in October. Because of the difficult economic situation, British investors are investing in other instruments. The Microsoft price chart, for example, is showing potential for growth, so many are interested in the U.S. stock market. 

“The market looks set to remain under pressure in the coming quarters. Inflation will remain high for some time, and interest rates are likely to continue to rise,” believes Nationwide Senior Economist Robert Gardner. – The outlook is unclear, and much will depend on how the overall economy behaves, but a relatively soft landing is still possible.”

Earlier we reported that Sanctions Circumvention was included in the EU’s list of criminal offenses.

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