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South Korea considers options to combat won vs dollar exchange rate volatility to make won vs dollar exchange rate more stable

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won vs dollar exchange rate

After the won vs. dollar exchange rate reached a new 13-year high, inflation in the country, which imports about 94% of its energy and natural resources, skyrocketed, making it necessary to revise South Korea’s contingency plans due to the strong volatility of the national currency; Business Insider wrote.

So far, the country’s officials have limited themselves to verbal intervention: the authorities said they are watching the rapid growth of the korean won volatility and are ready to take measures to combat excessive volatility in the currency market, according to Finance Minister Chu Ken Ho.

Another reminder of the need for intervention was made in late August by Bank of Korea Governor Ri Chan-yong: he said there is a “high probability of increased korean won volatility” in the currency market whenever the US Federal Reserve makes its monetary policy decisions.

Recall that the dollar rose Thursday to a high not seen since March 2009 against the won, or 0.6 percent to 1,399 won. For the year, the dollar is up about 18% against the won.

In 2022, South Korea posted its first annual trade deficit since 2008, as export growth slowed and the cost of imports rose. This year, the country’s inflation rate reached its highest in more than 2 decades, and in August it was 5.7%.

Earlier, we reported that the yuan is depreciating ahead of key central bank meetings.

Forex

Greenback keeps on climbing, dollar index at 10-month high

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Greenback keeps on climbing, dollar index at 10-month high
© Reuters. FILE PHOTO: Woman holds U.S. dollar banknotes in this illustration taken May 30, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

By Brigid Riley and Alun John

TOKYO/LONDON (Reuters) – The euro, pound and yen were all pinned at multi-month lows on Tuesday, with the Japanese currency on the brink of weakening past the psychological 150 per dollar level, as surging U.S. Treasury yields kept the dollar firmly on the front foot.

The euro was steady on the day at $1.0476, around its weakest since early December 2022, after a near-1% plunge on Monday when U.S. manufacturing data came in strong and Federal Reserve officials said monetary policy would need to stay restrictive for “some time”.

The combination of that and an agreement to avert a partial U.S. government shutdown sent benchmark Treasury yields to as high as 4.706% on Tuesday, a 16-year peak, in turn driving the dollar higher.

“There are two very powerful things that are supporting the U.S. dollar at the moment, the real rate differential is favourable to the U.S. and the U.S. economy is outperforming,” said Samy Chaar, chief economist at Lombard Odier.

Real interest rates, unlike nominal ones, factor in inflation which is falling faster in the United States than in Europe.

Chaar said he also thought there were technical factors driving the sell-off in U.S. Treasuries, possibly capitulation by major investors, as the economic situation, in his view, did not justify yields continuing to rise.

The pound fell to its lowest since March and was last down 0.26% at 1.20565, and traders were focused on the Japanese yen which was flat on the day at 149.89 per dollar, but still around its weakest in nearly a year and just shy of the 150 per dollar level that some see as potentially pushing Japanese authorities to intervene to prop up the currency.

Japanese Finance Minister Shunichi Suzuki said on Tuesday authorities were watching the currency market closely and stood ready to respond, but also said any decision on currency market intervention would be based on volatility, not specific yen levels.

Although Japanese officials have stated “that the government is not watching any particular level … interventions had previously occurred around 150, signifying official discomfort when the (yen) weakens beyond this point”, said Wei Liang Chang, foreign exchange and credit strategist at DBS.

The , which tracks the unit against six peers, was up 0.13% at 107.16, at its highest since November.

The main data points in the United States this week relate to the labour market. “(Tuesday’s) U.S. JOLTS job openings and non-farm payrolls on Friday can be a catalyst to push up U.S. yields and the USD if they surprise to the upside,” said Carol Kong, economist and currency strategist at Commonwealth Bank of Australia (OTC:).

The Australian dollar slipped to an 11-month low of $0.6302, down as much as 0.95% following the Reserve Bank of Australia’s (RBA) decision to hold rates, while Russia’s rouble weakened past the symbolic threshold of 100 to the dollar before recovering slightly in early trade.

The dollar was up 0.5% against the Swiss franc at 0.9215 at a six month high after Swiss inflation dipped and came in slightly below expectations

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South African rand weakens against US dollar amid unfavorable local data and rising US Treasury yields

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South African rand weakens against US dollar amid unfavorable local data and rising US Treasury yields
© Reuters

On Tuesday, the South African rand depreciated against the US dollar, a development attributed to unfavorable local economic data and rising US Treasury yields. The ABSA Manufacturing PMI’s decline signaled a growing divergence between the South African and US economies. This disparity was further highlighted by the hawkish remarks made by Fed official Mester.

The influence of China’s National Day Golden Week on commodity prices also contributed to the softer rand, favoring the safe-haven dollar. Market participants are closely observing the forthcoming speech by Raphael Bostic, Atlanta Fed Chief, which could potentially impact currency trends.

The pair is grappling with the 19.3000 resistance handle, revealing a rising wedge pattern that suggests a brief upside rally may be imminent. The susceptibility of Emerging Market currencies, particularly in relation to the USD/ZAR support levels, is being underscored in light of these developments.

These observations highlight the current state of global currency markets and underline the potential risks and opportunities for investors. As always, market participants are urged to closely monitor these dynamics as they evolve in response to both domestic and international economic indicators.

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

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USD/JPY Poised at Critical 150 Level, Goldman Sachs Predicts Rise to 155

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USD/JPY Poised at Critical 150 Level, Goldman Sachs Predicts Rise to 155
© Reuters.

The currency pair is currently teetering on the significant 150 level, influenced by minor fluctuations in U.S. Treasury yields, as of Tuesday. Market speculation is focused on the potential intervention by the Japanese Ministry of Finance (MOF), which could trigger follow-on trades and stops if this level is exceeded.

Goldman Sachs, however, has a different outlook. The multinational investment bank and financial services company foresees the USD/JPY climbing to 155, without any necessity for intervention. This prediction is backed by strong USD/JPY fundamentals.

This current situation mirrors the events of last October when the USD/JPY surged to 151.94 before experiencing a swift reversal. The market will be closely watching these developments and any potential interventions or lack thereof from the Japanese MOF.

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

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