Connect with us
  • tg

Forex

Japan says it won’t rule out any steps to prop up faltering yen

letizo News

Published

on

Japan says it won't rule out any steps to prop up faltering yen
© Reuters. FILE PHOTO: Japanese Finance Minister Shunichi Suzuki arrives for a news conference during the annual meeting of the International Monetary Fund and the World Bank, following last month’s deadly earthquake, in Marrakech, Morocco, October 13, 2023. REUTERS

By Tetsushi Kajimoto

TOKYO (Reuters) -Japan would not rule out any measures to rein in weakness in the yen, finance minister Shunichi Suzuki said in the latest warning against speculators as the nation navigates a delicate period after last week’s historic shift away from years of easy policy.

Echoing concerns from Japan’s top currency diplomat the previous day, Suzuki said on Tuesday that a weak yen has positive and negative effects on the economy but excess volatility raises uncertainty for business operations.

This in turn could hurt the economy, the minister said, reinforcing Tokyo’s focus on the velocity of market moves, rather than on specific currency levels.

“Rapid currency moves are undesirable,” Suzuki told reporters after a cabinet meeting. “It is important for currencies to move stably, reflecting economic fundamentals.”

The yen’s sell-off picked up pace in the wake of last week’s landmark decision by the Bank of Japan to end eight years of negative interest rates, ushering in a new era of tighter monetary policy in a nation where cheap money had been the norm for decades.

The first rate hike in Japan since 2017, however, was well telegraphed to markets, triggering a slide in the yen in a classic ‘sell-the-fact’ trade. Crucially, yen bears have been emboldened by market expectations that the BOJ will raise rates only marginally in coming months, meaning Japanese-U.S. rate differentials will remain stark for a while longer.

A weak yen boosts Japanese exporters’ profits, but it also raises the costs of imports and squeezes households’ wealth. Policymakers are particularly sensitive to factors threatening consumption as that would undo years of trying to create a virtuous cycle of demand-led price and economic growth.

The dollar was off slightly against the yen in Tuesday afternoon trade, fetching 151.26 and facing great resistance near the 152 level due to the threat of intervention from Japanese authorities. The greenback is up about 7% on the yen since the start of the year.

“It wouldn’t surprise me if authorities intervene in the currency market if it breaks past 152 yen,” said Makoto Noji, chief market strategist at SMBC Nikko Securities in Japan.

Suzuki declined to comment on the possibility of Tokyo intervening to stem the yen weakness, but suggested the speed of the currency’s fluctuations will be a factor in any decision to enter the market.

“If I answer the question about currency intervention, it could have unintended effects on the market,” Suzuki said, adding “if there’s excessive moves, we will respond appropriately without ruling out any measures.”

Japan last intervened in the currency market in September and October 2022 to stem the yen’s declines, initially when the dollar hit around 145 to the yen, and later in October when the U.S. currency surged to a 32-year high near 152 levels.

“Behind the yen weakening lies not only speculators but also retail investors who have appetite for foreign stock markets,” SMBC Nikko Securities’ Noji said.

“The government must be careful not to disturb such investment flows too much. That said, authorities may have no choice but to arrest the dollar’s ascent towards 160 yen.”

Forex

Dollar flat ahead of key inflation release; Middle East tensions ease

letizo News

Published

on

Investing.com – The U.S. dollar traded largely unchanged in calm trading Monday, amid a calming of tensions in the Middle East and ahead of the release of the Federal Reserve’s favorite gauge of inflation later in the week.

At 05:40 ET (09:40 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded flat at 106.005, retreating from the five-month peak of 106.51 seen last week. 

Dollar stable ahead of key inflation release

The dollar surged to new highs last week after Israel launched a missile attack on Iran, in an escalation of the conflict in the volatile Middle East.

However, tensions appear to have been cooled, with Tehran downplaying Israel’s retaliatory drone strike against Iran, in what appeared to be a move aimed at averting a regional war.

“Sentiment is generally supported across asset classes as the week starts,” said analysts at ING, in a note. “All interested parties appear to have chosen the path of downplaying the size and consequences of Friday’s Israeli strikes in Iran.”

That said, the dollar has also been supported by strong U.S. economic data and persistent inflation, coupled with a slew of hawkish comments from Fed officials, reducing the chances of the Federal Reserve cutting rates any time soon. 

These officials will be keeping quiet this week, ahead of next week’s , but activity is likely to be limited ahead of Friday’s look at the , the Federal Reserve’s favored inflation gauge, which economists expect to remain elevated in March.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or
remove ads
.

Other economic data for the week includes an initial estimate of first quarter , which is expected to have moderated slightly from the previous quarter. Data on and will also be released along with revised figures on consumer sentiment and inflation expectations.

Euro edges up, but ECB set to cut early

In Europe, rose 0.1% to 1.0656, trading near six-month lows with regional economic weakness set to result in the European Central Bank cutting interest rates before the Federal Reserve.

Elevated tensions in the Middle East are unlikely to drive up energy prices and should not affect the European Central Bank’s plans to start cutting interest rates in June, French central bank chief Francois Villeroy de Galhau said on Sunday.

“Barring surprises, there is no need to wait much longer”, Villeroy told business daily Les Echos in an interview. “At the moment, the conflict is not leading to a marked rise in oil prices. If this were ever the case, we would have to analyse monetary policy for whether this shock is temporary and limited, or whether it is transmitted – beyond commodities – to underlying inflation.”

climbed 0.1% lower to 1.2355, just above its lowest level since mid-November seen on Friday, after Bank of England Governor Andrew Bailey and Deputy Governor Dave Ramsden alluded last week to Britain’s inflation slowing as expected. 

“Sterling markets moved on Friday after the Bank of England’s deputy governor, Dave Ramsden, sounded less concerned about price pressures and suggested that there were indications of UK inflation converging to that of the eurozone,” ING said. “Crucially, he added that the Bank will be “responsive” as evidence on inflation accumulates.”

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or
remove ads
.

Yen weak ahead of BOJ meeting

In Asia, traded 0.1% higher at 154.74, remaining well above the 154 level and near 34-year highs, keeping investors on guard over any potential government intervention. 

Focus this week is on a Bank of Japan rate decision on Friday – the central bank’s first meeting after a historic rate hike in March. Any cues on future rate hikes and policy changes will be closely watched.

edged 0.1% higher to 7.2437, after the People’s Bank of China kept its benchmark on hold, as expected. 

The LPR was kept at record lows, as the PBOC moved to keep monetary policy as loose as possible to buoy economic growth. However, low interest rates are also expected to keep the yuan under pressure. 

The USDCNY pair was close to a five-month high, above the psychologically important 7.2 level. 

 

Continue Reading

Forex

UBS raises USDCNY forecast amid geopolitical tensions

letizo News

Published

on

On Monday, UBS revised its forecast for the exchange rate, citing increasing geopolitical tensions and expectations of fewer rate cuts by the Federal Reserve. The Swiss financial services firm now anticipates the USD/CNY rate to reach 7.35 by June, up from the previous target of 7.20. Similarly, the September target has been adjusted to 7.30 from 7.15, the December target to 7.25 from 7.15, and the March 2025 target to 7.20 from 7.15.

UBS suggests that the People’s Bank of China (PBoC) is showing a greater willingness to allow a weaker yuan, which could contribute to additional short-term pressure on the Chinese currency. The firm’s analysis points to the rising geopolitical tensions as a key factor influencing the yuan’s trajectory.

Despite the potential for a pivot by the Federal Reserve in September, which might typically ease the upward trend of the USD/CNY, UBS believes that the impact could be mitigated. The firm notes that market concerns about US-China trade tensions, especially in the lead-up to the US presidential election in November, could dampen the effects of any policy changes by the Fed.

UBS’s revised targets reflect a cautious outlook on the Chinese yuan, as the global financial market continues to weigh various geopolitical and economic factors. The firm’s adjustment of the USD/CNY targets highlights the complex interplay between central bank policies, international relations, and market sentiment.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Continue Reading

Forex

Asia FX weak as rate fears keep dollar steady

letizo News

Published

on

Investing.com– Most Asian currencies moved in a flat-to-low range on Monday, and were nursing steep losses from the past week as concerns over higher-for-longer interest rates kept traders largely biased towards the dollar.

Still, easing fears over a bigger conflict in the Middle East offered regional currencies some relief, as risk appetite improved. 

But most regional units still retained a bulk of their losses from over the past week, as traders steadily priced out expectations that the Federal Reserve will cut interest rates by as soon as June.

Dollar steady, more rate cues awaited this week 

The and both fell slightly in Asian trade on Monday, but remained close to over five-month highs hit earlier in April. 

Waning bets on a June rate cut boosted the dollar, especially after strong U.S. inflation readings and hawkish commentary from top Fed officials. 

Focus this week is on more cues on U.S. monetary policy, specifically from data- which is the Fed’s preferred inflation gauge. The reading is due on Friday and is expected to reiterate that U.S. inflation remained sticky in March.

More cues on the U.S. economy are also due this week, with data for April set to offer more insight into business activity.

Chinese yuan steady after PBOC holds loan prime rate 

The Chinese yuan’s pair moved little on Monday after the People’s Bank of China kept its benchmark on hold, as expected. 

The LPR was kept at record lows, as the PBOC moved to keep monetary policy as loose as possible to buoy economic growth. The central bank is also expected to further trim the rate this year, after a cut to the in February. 

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or
remove ads
.

But low interest rates are also expected to keep the yuan under pressure. The USDCNY pair was close to a five-month high, above the psychologically important 7.2 level. 

Japanese yen flat, BOJ meeting awaited 

The Japanese yen’s pair moved little on Monday, but remained well above the 154 level amid little relief from the dollar.

This kept investors on guard over any potential government intervention, especially as the USDJPY pair tested 34-year highs at 155. 

Focus this week is on a on Friday- the central bank’s first meeting after a historic rate hike in March. Any cues on future rate hikes and policy changes will be closely watched.

Broader Asian currencies moved little as fears of higher-for-longer U.S. rates remained in play. 

The Australian dollar’s pair rose 0.3% after tumbling to a five-month low last week.

The South Korean won’s pair rose 0.5%, while the Singapore dollar’s pair was flat.

The Indian rupee’s pair rose 0.1%, but was trading below record highs hit last week.

Continue Reading

Trending

©2021-2024 Letizo All Rights Reserved