Forex
Euro declines against Yen amid safe-haven demand, ECB rate outlook
© Reuters.
The Euro dipped against the Japanese Yen in early European trading today as investors sought the safety of the Yen due to a lack of significant market drivers. The pair was trading around 161.83, marking a 0.29% decline from its previous position.
Market participants are closely monitoring the upcoming speech by European Central Bank President Christine Lagarde for indications that could sway market sentiment. The currency pair’s movement has been further influenced by comments from ECB member François Villeroy de Galhau, who emphasized the need to maintain current interest rates, pushing back against any expectations of rate cuts.
Despite a bearish Relative Strength Index (RSI) signal, other technical indicators hint at potential bullish momentum if the pair remains above certain key levels. Traders are watching the 100-hour Exponential Moving Averages (EMAs) closely, which is considered an important support level at 161.60. On the flip side, immediate resistance is identified at the 50-hour EMA, which stands at 161.46.
Investors and traders are now awaiting more concrete signals from ECB officials that could provide clearer direction on the future path of monetary policy and its impact on currency valuations.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
Investing.com – The US dollar has had a difficult summer, dropping substantially during the month of August, but JPMorgan thinks those predicting the demise of the U.S. currency are getting ahead of themselves.
At 06:00 ET (10:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% lower to 101.127, having lost 1.6% over the course of the last month.
“Diversification away from the dollar is a growing trend,” said analysts at JPMorgan, in a note dated Sept. 4, “but we find that the factors that support dollar dominance remain well-entrenched and structural in nature.”
The dollar’s role in global finance and its economic and financial stability implications are supported by deep and liquid capital markets, rule of law and predictable legal systems, commitment to a free-floating regime, and smooth functioning of the financial system for USD liquidity and institutional transparency, the bank added.
Additionally, the genuine confidence of the private sector in the dollar as a store of value seems uncontested, and the dollar remains the most widely used currency across a variety of metrics.
That said, “we are witnessing greater diversification and important shifts in cross-border transactions as a result of sanctions against Russia, China’s efforts to bolster usage of the RMB, and geoeconomic fragmentation,” JPMorgan said.
The more important and underappreciated risk, the bank added, is the increased focus on payments autonomy and the desire to develop alternative financial systems and payments mechanisms that do not rely on the US dollar.
“De-dollarization risks appear exaggerated, but cross-border flows are dramatically transforming within trading blocs and commodity markets, along with a rise in alternative financial architecture for global payments,” JPMorgan said.
By Nimesh Vora
MUMBAI (Reuters) – The Indian rupee ended at its record closing low on Thursday, but was little changed versus the previous session, as the central bank’s intervention helped negate the incessant dollar demand from importers.
The rupee ended at 83.9825 to the U.S. dollar compared to 83.9650 in the previous session. Intraday volatility was muted, similar to the activity in recent sessions, with the local currency trading in a 2 paisa range.
The Reserve Bank of India yet again sold dollars to support the rupee, which prevented it from slipping past the crucial 84 level.
“The RBI was at it through most of today’s session. There is obviously just no way of knowing when the RBI will decide that it has had enough of defending 84,” a currency trader at a bank said.
The rupee needed the central bank’s help even on a day when the dollar was weak across the board.
Weak U.S. job opening data pushed the odds of a 50-basis-point Federal Reserve rate cut this month higher to 45%, prompting traders to dump the dollar.
“The rupee today completely disregarded the dollar’s decline, like it has been doing for a number of weeks now,” Kunal Kurani, associate vice president at Mecklai Financial said.
“Now let’s see whether Friday’s (U.S.) job report will change things.”
August’s U.S. non-farm payrolls data is being considered the most important jobs report in a long time in the wake of comments by Federal Reserve Chair Jerome Powell that further weakening in the labour market will not be welcome.
Friday’s report will decide whether the Fed will cut rates by 25 bps or 50 bps at the Sept 17-18 meeting. Right now, the futures market indicates that it is a toss-up.
By Elena Fabrichnaya
MOSCOW (Reuters) – Major Russian banks have called on the central bank to take action to counter a yuan liquidity deficit, which has led to the rouble tumbling to its lowest level since April against the Chinese currency and driven yuan swap rates into triple digits.
The rouble fell by almost 5% against the yuan on Sept. 4 on the Moscow Stock Exchange (MOEX) after the finance ministry’s plans for forex interventions implied that the central bank’s daily yuan sales would plunge in the coming month to the equivalent of $200 million.
The central bank had been selling $7.3 billion worth of yuan per day during the past month. The plunge coincided with oil giant Rosneft’s 15 billion yuan bond placement, which also sapped liquidity from the market.
“We cannot lend in yuan because we have nothing to cover our foreign currency positions with,” said Sberbank CEO German Gref, stressing that the central bank needed to participate more actively in the market.
The yuan has become the most traded foreign currency on MOEX after Western sanctions halted exchange trade in dollars and euros, with many banks developing yuan-denominated products for their clients.
Yuan liquidity is mainly provided by the central bank through daily sales and one-day yuan swaps, as well as through currency sales by exporting companies.
Chinese banks in Russia, meanwhile, are avoiding currency trading for fear of secondary Western sanctions.
At the start of September, banks raised a record 35 billion yuan from the central bank through its one-day swaps.
“I think the central bank can do something. They hopefully understand the need to increase the liquidity offer through swaps,” said Andrei Kostin, CEO of second-largest lender VTB, stressing that exporters should sell more yuan as well.
The acute yuan shortage also follows months of delays in payments for trade with Russia by Chinese banks, which have grown wary of dealing with Russia after U.S. threats of secondary Western sanctions. These problems culminated in August in billions of yuan being stuck in limbo.
Russia and China have been discussing a joint system for bilateral payments, but no breakthrough is in sight. VTB’s Kostin said that since Russia’s trade with China was balanced, establishing a clearing mechanism for payments in national currencies should not be a problem.
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