Economy

Yen slips to fresh 15-year low against euro as BOJ keeps ultra-low rates

Published

11 months ago

June 16, 2023

The yen fell to a new 15-year low against the euro on Friday after the Bank of Japan (BOJ) kept ultra-low interest rates and forecast that inflation will slow later this year in contrast with the European Central Bank’s (ECB) rate hike on Thursday.

As widely expected, the BOJ maintained its -0.1% short-term interest rate target and a 0% cap on the 10-year bond yield set under its yield curve control (YCC) policy.

“We expect inflation to moderate, but it’s true the pace of decline is somewhat slow. But we’re still in the early stages of the moderation. There’s uncertainty on whether the future slowdown will be a gradual one, or a quite sharp one,” BOJ Governor Kazuo Ueda said.

The yen fell broadly following the decision and hit a fresh 15-year low of 154.70 per euro, down 0.7% on the day. It was set for the biggest weekly decline against the single currency in three year.

Against the U.S. dollar, the Japanese currency fell 0.6% to 141.22 yen.

“While the decision itself was not a major surprise, a few participants… had expected a YCC adjustment, and the financial market reacted with higher stock prices and a weaker yen,” said Hirofumi Suzuki, chief FX strategist at SMBC.

Elsewhere, the euro was poised for its best week in three months after the ECB raised borrowing costs to a 22-year high and signalled further rate hikes to come.

That and some soft U.S. economic data saw the dollar fall broadly as traders scaled back their bets on how high U.S. interest rates would need to rise.

The euro flattened at $1.0951 after rising to a one-month high against the dollar, having surged over 1% on Thursday following the rate hike and forward guidance from the ECB.

ECB President Christine Lagarde told a news conference that another rate hike in July was highly likely and that the central bank still has “ground to cover” to stave off high inflation.

Sterling edged 0.1% higher at $1.2793 after rising to its highest level since April 2022 as traders similarly ramped up bets that the Bank of England is likely to raise interest rates for the 13th meeting in a row next week.

FED FACES GRIM DATA

The ECB’s monetary policy decision came a day after the U.S. Federal Reserve left interest rates unchanged, snapping a string of 10 consecutive rate hikes. However, the Fed also signalled that borrowing costs may still need to rise by as much as half of a percentage point by the end of this year.

But a string of data on Thursday had markets challenging that view, as economic activity in the United States slows and inflation cools.

Production at U.S. factories almost stalled in May as manufacturing struggled under the weight of higher interest rates, while U.S. import prices similarly fell last month.

A separate report from the Labor Department showed initial claims for state unemployment benefits were unchanged at a seasonally adjusted 262,0000 for the week ended June 10, above economists’ forecast for 249,000 claims.

U.S. retail sales unexpectedly rose in May, however, as consumers stepped up purchases of motor vehicles and building materials.

Against a basket of currencies, the dollar index edged up 0.1% to 102.25, after slipping to a one-month low on Thursday.

Economy

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

Published

5 months ago

December 26, 2023

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.

The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.

Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.

“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.

Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.

“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.

The bank will next convene to set its benchmark rate on Feb. 16.

The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.

Economy

China identifies second set of projects in $140 billion spending plan

Published

5 months ago

December 25, 2023

China identifies second set of projects in $140 billion spending plan

© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo

SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.

With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.

The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.

China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.

The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.

“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.

The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.

($1 = 7.1315 renminbi)

Economy

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

Published

5 months ago

December 25, 2023

Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.

“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.

Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.

“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.

The bank will next convene to set its benchmark rate on Feb. 16.

The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.