Forex
Yen advances for 2nd day ahead of BOJ meeting next week; dollar firmer
![](https://letizo.com/wp-content/uploads/2024/07/yen-advances-for-2nd-day-ahead-of-boj-meeting-next-weekdollar-firmer_66a1179f18c9b.jpeg)
By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) -The yen rose for a second straight session against the dollar on Tuesday, boosted by comments from a senior Japanese politician about normalizing monetary policy, adding pressure on the Bank of Japan to continue hiking interest rates to boost the currency.
The U.S. dollar overall was higher as traders waited for inflation data later in the week, while the Australian and New Zealand dollars continued to struggle after China’s surprise interest rate cuts. The dollar is viewed as a proxy for China risks.
The U.S. dollar was last down 0.9% against the Japanese yen at 155.625. It earlier fell to a five-week low of 155.375 on Thursday.
Senior ruling party official Toshimitsu Motegi said overnight that the Bank of Japan should more clearly indicate its resolve to normalize monetary policy, including through steady interest rate hikes. The BOJ next sets rates on July 31.
Most economists polled by Reuters expect the BOJ to keep rates on hold at the meeting. It last raised rates in March to a range of 0%-0.1% from -0.1%.
“Obviously, the market is positioning itself for the BOJ decision and the Federal Reserve meeting is also coming up,” said Eugene Epstein, head of structured products, North America at Moneycorp.
“But there was no specific news at the moment. If I could gather anything, I would say it’s a continued squeeze. The hawks — all the people who are looking to short the yen — were circling so to speak.”
The yen has found some support on the back of Tokyo’s recent bouts of intervention to prop up the currency and as traders looked to the BOJ’s decision.
In afternoon trading, the , which tracks the U.S. currency against six peers, rose 0.1% to 104.45, after earlier climbing to a two-week high. It recovered from a four-month low of 103.64 last week.
The dollar reacted little to data showing U.S. existing home sales fell more than expected in June as the median house price set another record high.
Home sales dropped 5.4% last month to a seasonally adjusted annual rate of 3.89 million units, the lowest since December, data showed. Meanwhile, the median existing home price soared 4.1% from a year earlier to an all-time high of $426,900, the second straight month it touched a record peak.
In other currencies, the euro was down 0.4% against the dollar at $1.0851, after falling to a two-week trough earlier in the session. Sterling was 0.2% lower against the dollar at $1.2903.
The Australian and New Zealand dollars struggled to regain their footing on Tuesday after China’s move to cut several key interest rates.
China surprised markets on Monday by cutting major short and long-term interest rates in its first such broad move since last August, signalling intent to boost growth in the world’s second-largest economy.
The Australian dollar fell to a three-week low of US$0.6612, while the New Zealand dollar hit its weakest since early May at US$0.5951.
“We have seen a sell-off in commodities overnight and the worry is whether or not China will be able to dig its way out of its slow growth period,” said Thierry Albert Wizman, global FX and rate strategist at Macquarie in New York.
“Some people are seeing the interest rate cuts as a sign of desperation for policymakers, creating a bit of a haven trade for the U.S. dollar.”
Trading was relatively subdued in a week with little in the way of economic data until the release of U.S. personal consumption expenditure (PCE) inflation figures for June on Friday.
In addition, the market’s reaction to U.S. President Joe Biden’s decision to bow out of the election race was muted, though there was some unwinding of the so-called Trump trade, which saw the dollar and U.S. Treasury yields ease a touch.
In cryptocurrencies, the first U.S. exchange-traded funds (ETFs) tied to the price of ether, the world’s second-largest cryptocurrency after bitcoin, began trading on Tuesday.
Ether was last down 0.3% at $3,479, while bitcoin also fell, down 3.2% at $65,985.
Currency
bid
prices at
23 July
07:21
p.m. GMT
Descripti RIC Last U.S. Pct YTD Pct High Low
on Close Change Bid Bid
Previous
Session
Dollar 104.44 104.3 0.14% 3.03% 104.53 104.
index 2
Euro/Doll 1.0851 1.0892 -0.37% -1.69% $1.0896 $1.0
ar 844
Dollar/Ye 155.6 157.1 -0.93% 10.34% 157.04 155.
n 6
Euro/Yen 1.0851 171 -1.25% 8.5% 171.09 168.
84
Dollar/Sw 0.8913 0.8896 0.2% 5.91% 0.8924 0.88
iss 89
Sterling/ 1.2901 1.2931 -0.21% 1.39% $1.2934 $1.0
Dollar 844
Dollar/Ca 1.3771 1.3758 0.11% 3.9% 1.3776 1.37
nadian 53
Aussie/Do 0.6613 0.6643 -0.42% -2.98% $0.6646 $0.6
llar 612
Euro/Swis 0.967 0.9685 -0.15% 4.14% 0.9691 0.96
s 69
Euro/Ster 0.841 0.8419 -0.11% -2.98% 0.8426 0.83
ling 98
NZ 0.5952 0.598 -0.45% -5.8% $0.5981 0.59
Dollar/Do 51
llar
Dollar/No 11.0175 10.9366 0.74% 8.71% 11.051 10.9
rway 429
Euro/Norw 11.9565 11.9115 0.36% 6.5% 11.9942 11.9
ay 195
Dollar/Sw 10.7624 10.7168 0.43% 6.91% 10.782 10.7
eden 066
Euro/Swed 11.6796 11.6735 0.05% 4.98% 11.6972 11.6
en 538
Forex
Major Russian lenders say yuan coffers empty, urge central bank action
![](https://letizo.com/wp-content/uploads/2024/09/major-russian-lenders-say-yuan-coffers-empty-urge-centralbank-action_66dc6b1523127.jpeg)
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.
Forex
Bank of America sees more downside for the dollar
![](https://letizo.com/wp-content/uploads/2024/09/bank-of-america-sees-more-downside-for-the-dollar_66dc6b1b4bb7b.jpeg)
Investing,com – The US dollar has stabilized after a sharp fall in August, but Bank of America Securities sees more troubles ahead for the US currency.
At 07:20 ET (11:20 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% lower to 101.077, having largely held its course over the last week.
That said, the US currency is still down 1.6% over the month.
The dollar’s selloff last month stood out in a historical context, according to analysts at Bank of America Securities, in a note dated Sept. 5.
The greenback has since stabilized, however, despite the outsized weakness, the US bank still sees three reasons to stay bearish on the Dollar Index (DXY).
Following similar episodes of bearish DXY breakouts, the index has tended to continue its downtrend, the bank said.
In the last 3 analogs, DXY index fell on average for another 4% before reaching a bottom. Extending this analysis to bilateral USD/G10 pairs suggests a continuation of the USD downtrend is more likely vs EUR, GBP, and AUD than SEK, NOK, and CHF in G10.
While the DXY made a new year-to-date low in August, broad nominal and real USD trade-weighted indices have stayed at Q4 2022 levels and would suggest the USD remains overvalued.
The USD selloff in 2024 has been concentrated in and other European currencies, leading to DXY divergence from other USD indices.
The bank also noted US 10y Treasury yield’s tendency to fall after the first Federal Reserve cut, while global financial conditions are set to loosen further.
“USD may see more weakness as other central banks, particularly the ones that cut policy rates ahead of the Fed, can now afford to let the Fed do some of their work and indirectly support global economies outside of the US,” BoA added.
Forex
Dollar’s demise appears overstated – JPMorgan
![](https://letizo.com/wp-content/uploads/2024/09/dollars-demise-appears-overstated-jpmorgan_66dc6b208bdf2.jpeg)
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.
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