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Analysis-Japan keen to speed up digital yen launch as China adds geopolitical twist

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Analysis-Japan keen to speed up digital yen launch as China adds geopolitical twist
© Reuters. FILE PHOTO: A man wearing a protective mask stands in front of the headquarters of the Bank of Japan amid the coronavirus disease (COVID-19) outbreak in Tokyo, Japan, May 22, 2020.REUTERS/Kim Kyung-Hoon/File Photo

By Leika Kihara

TOKYO (Reuters) – Japan’s new political leadership is calling on the country’s financial bureaucrats to ramp up efforts toward issuing a digital currency, pointing to China’s far quicker progress as a potential challenge to the global economic order.

The government has increased staff looking into legal and technical aspects of issuing a central bank digital currency (CBDC), which are digital forms of existing currencies.

While the political attention has yet to translate into any other direct investment, it is also likely to keep the Bank of Japan (BOJ) under pressure to shift away from its cautious, baby-step approach toward issuing a digital yen, analysts say.

“We must think about what could happen to Japan’s national security if other countries move ahead on CBDC,” said Takayuki Kobayashi, a minister overseeing economic security – a new role created under Prime Minister Fumio Kishida’s administration.

“Japan must speed things up so it’s ready to issue a digital yen any time,” he said.

A global front-runner, China has already run tests in major cities for a possible launch of a digital yuan next year. Japan, along with other G7 advanced nations, have moved much slower.

The BOJ only started the first phase of its experiment in April, and says it has no immediate plans to issue a digital yen. Pilot programmes, if any, won’t take place until 2023 at the earliest.

That lukewarm stance may be put to test as Kishida has made economic security a policy priority, and framed questions around CBDC beyond finance into one of national security.

While G7 central banks generally agree on the need to counter China on issues around privacy, the case is particularly strong for Japan as lawmakers worry about the growing economic might of its assertive neighbour.

Some influential ruling party lawmakers see China’s advances on CBDC as a potential threat to the dollar’s status as a global reserve currency, and the financial dominance of Washington – Japan’s biggest ally.

A close aide to Kishida told Reuters Japan must “work closely with the United States to counter any attempt that threatens the dollar’s reserve-currency status,” adding the BOJ was coordinating with the finance ministry to ensure speedy progress for issuing a digital yen.

Opposition parties have also called in their election campaign platforms for speeding up CBDC plans.

BOJ officials say China’s plan won’t directly affect the timeframe for their CBDC experiments as the key purpose of issuing a digital yen is to provide convenient, efficient payment and settlement means to the public.

What could affect the BOJ more than China’s plan would be how quickly its European and U.S. counterparts announce plans for issuing CBDCs, say sources familiar with its thinking.

Debate over issuing a digital yen may intensify next year as Kishida’s administration lays out details of its economic security plans, and as China is seen promoting its digital yuan at the Beijing Winter Olympic Games in February.

“It’s clear Kishida’s administration and his ruling party are keen on issuing a digital yen,” said former BOJ board member Takahide Kiuchi, who is currently an economist at Japan’s Nomura Research Institute.

“If China launches a digital yuan next year and Europe’s central bank announces plans to issue a digital euro, that will have a huge impact on Japan and pile pressure on the BOJ.”

Forex

Dollar Becalmed After Falling in Response to Omicron Hopes

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Dollar Becalmed After Falling in Response to Omicron Hopes
© Reuters.

By Geoffrey Smith 

Investing.com — The dollar was flat in early trading in Europe on Friday, on course to end the week lower after encouraging signs from the pandemic revived global risk appetite, supporting higher yielders. 

By 3:30 AM ET (0830 GMT) the , which tracks the greenback against a basket of half a dozen advanced economy countries, was effectively unchanged at 96.06. Moves in all the major currencies were also minor. The euro was up less than 0.1% at $1.1347 and the pound was up a similar amount at $1.3412.

However, the dollar has lost between 1% and 1.5% this week against and the , and dollars, and nearly 1% against the , as scientific data has dribbled out suggesting that the latest wave of the pandemic will be less economically damaging than previous ones. The only notable gains it has made have been against other haven currencies, such as the and the . 

Data released on Thursday that showed sustained inflationary pressure in the U.S. weren’t enough to upset the broader optimism as a growing body of evidence suggested that the Omicron variant of Covid-19 is less likely than all previous dominant strains to lead to serious illness. The more evidence goes in that direction, the less likely disruptions to economic life will become. 

Trading has now all but stopped ahead of the Christmas holiday period, but markets remain at least formally open.

As has been the case all week, the sharpest moves are in the , whose rally in response to President Recep Tayyip Erdogan’s attempts to stop dollar hoarding now appears to be running out of steam. From a high of over 18 lira last week, the dollar fell as low as 10.1565 on Thursday before starting to gain ground again. By 3:30 AM ET, it traded at 11.6279, up 3.6% on the day.

The was testing its highest level in over a month after news suggesting that talks with the U.S. to de-escalate the situation on the Ukrainian border may take place in the near future. President Vladimir Putin slightly dialed down the tension at his annual press conference on Thursday, declining to repeat a threat of military action that he had made in a speech earlier in the week.

The also strengthened after fresh data showing that the first country to identify the Omicron variant of Covid-19 may soon put its latest infection wave behind it. The 7-day average for new infections is already down by around a quarter from its peak last week. 

 

 

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Forex

Dollar Down as Fading Omicron Fears Boost Investor Risk Appetite

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Dollar Down as Fading Omicron Fears Boost Investor Risk Appetite
© Reuters.

By Gina Lee

Investing.com – The dollar was down on Friday morning in Asia, with investors towards riskier assets as fears of the omicron COVID-19 variant’s virulence continue to fade.

The that tracks the greenback against a basket of other currencies inched down 0.02% to 96.035 by 10:52 PM ET (3:52 AM GMT).

The pair inched down 0.03% to 114.35, with Japan’s cabinet approving a for the year starting in April 2022. According to the country’s Finance Ministry, Japan plans JPY107.6 trillion yen ($941.26 billion) in overall spending for the year ending March 2023, a 0.9% increase from the current year’s initial budget.

Meanwhile, data released earlier in the day showed that Japan’s grew 0.5% year-on-year in November.

The pair edged down 0.13% to 0.7232 and the pair edged down 0.14% to 0.6815.

The pair inched up 0.01% to 6.3702, with the People’s Bank of China setting a weaker-than-forecast yuan fixing, at 6.3692 per dollar, for a record 15th day on Friday. This is the longest period of lower-than-expected yuan fixings since surveys began in 2018, based on instances when the rate is even a fraction below the estimate.

The pair inched up 0.03% to 1.3409.

Volumes were thin ahead of the holidays, with U.S. markets closed and other markets, such as Hong Kong, ending the trading day early.

Investors cheered the U.S. Food and Drug Administration’s emergency use approval for Molnupiravir, Merck & Co . Inc.’s (NYSE:) COVID-19 pill, on Thursday.

A U.K. study that said omicron infections are less likely to lead to hospitalization also boosted sentiment. However, the study added that the variant may still produce a substantial number of serious cases due to its infectiousness.

Meanwhile, a laboratory study showed that two doses and a booster of Sinovac Biotech Ltd.’s vaccine did not produce sufficient levels of neutralizing antibodies to protect against omicron.

Elsewhere in Asia Pacific, authorities locked down the western Chinese city of Xi’an, the biggest such move since the pandemic started in early 2020. The city’s 13 million residents were told to remain in their homes and to designate one person to go out every other day for necessities, in a bid to curb China’s latest COVID-19 outbreak.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Singapore central bank $60 billion swap facility with Fed to expire on Dec. 31

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Singapore central bank $60 billion swap facility with Fed to expire on Dec. 31
© Reuters. FILE PHOTO: A view of the Monetary Authority of Singapore’s headquarters in Singapore June 28, 2017. Picture taken June 28, 2017. REUTERS/Darren Whiteside/File Photo

SINGAPORE (Reuters) – Singapore central bank said on Friday its $60 billion swap arrangement with the U.S. Federal Reserve will expire on Dec. 31, as U.S. dollar funding conditions in Singapore and the region have normalised and continue to be stable.

The facility launched in March 2020 provided $24.6 billion to local, regional and international banks in the midst of the COVID-19 crisis, the Monetary Authority of Singapore (MAS) said.

“MAS continues to remain vigilant to USD funding conditions in Singapore and will be prepared to take action in the event of severe strains in the USD funding market,” it said.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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