Forex
Yen drifts lower from 2-1/2-month peak vs dollar as markets stabilize
![](https://letizo.com/wp-content/uploads/2024/07/yen-drifts-lower-from-2-1-2-month-peak-vs-dollar-as-marketsstabilize_66a3ba9aa6638.jpeg)
By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) -The yen edged lower from a 2-1/2-month high against the U.S. dollar on Thursday, as financial markets stabilized, with investors looking ahead to next week’s Bank of Japan meeting which could see a potential rate hike.
The Japanese unit this week rallied sharply as market participants unwound their long-held bets against the currency. At the same time, a plunge in global stocks in recent sessions had driven investors toward traditionally safe assets such as the Swiss franc and yen.
U.S. equities, however, recovered on Thursday after a steep sell-off in the previous session.
For the week, the yen has risen 2.4%, on track for its best weekly gain since late April. The greenback was last slightly down at 153.84 yen.
The dollar, however, trimmed losses against the yen and euro after data showed the world’s largest economy expanded faster than expected and inflation slowed in the second quarter. That reduced brewing expectations of a larger-than-expected rate cut in September, or a sudden Federal Reserve easing at next week’s meeting.
“The Japanese yen is flatlining on diminished safe-haven demand, and the speculative fervor behind its recent bull run seems to be running out of steam,” said Karl Schamotta, chief market strategist at Corpay in Toronto.
“We think markets have gotten a little too far over their skis given that underlying economic fundamentals don’t yet support a rapid tightening cycle from the Bank of Japan, and that rate differentials will remain wide even if the Fed begins cutting in coming months.”
The rate futures market has priced in a 67.2% chance that the BOJ will raise rates next week by 10 basis points (bps), up from about 40% earlier in the week, according to LSEG estimates.
The euro was slightly up against the dollar at $1.0846 , with the flat at 104.36. The index was at 104.21 just before the release of economic growth data.
Advance estimates showed that U.S. gross domestic product (GDP) grew at a 2.8% annualized rate in the last quarter. Economists polled by Reuters had forecast GDP rising at a 2.0% rate.
The personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, increased at a 2.9% rate after surging at a 3.7% pace in the first quarter.
Against the Swiss franc, the dollar dropped 0.5% to 0.8806 francs.
AHEAD OF ITSELF
“The market got ahead of itself on Fed cuts. Before the GDP number, the market is pricing as if the Fed is going to cut 50 basis points in September,” said Marc Chandler, chief market strategist at Bannockburn Forex in New York.
He also cited comments from former New York Fed President Bill Dudley in a Bloomberg column on Wednesday, who said the Fed should cut rates next week, citing recent employment data.
“The GDP number shows that the Fed is not under that kind of urgency,” Chandler said.
The Fed remains firmly on track to cut interest rates in September, according to fed funds futures data. The futures market has also priced in about 68 basis points (bps) of cuts this year, based on LSEG calculations.
U.S. jobless claims data were also consistent with an economy still holding up well.
Initial claims for state unemployment benefits dropped 10,000 to a seasonally adjusted 235,000 for the week ended July 20, the data showed. Economists polled by Reuters had forecast 238,000 claims for the latest week.
The only blemish, however, was the U.S. durables report, which showed durable goods orders fell 6.6% in June on slumping transportation orders, compared with expectations for a 0.3% rise.
In other currencies, the Australian dollar fell to US$0.6519, its lowest since early May. It was last down 0.6% against the greenback at US$0.6541.
rallied against the dollar, which fell to its lowest since early May at 7.205, as the yen’s rally spilled over to the Chinese unit. The dollar was last down 0.2% at 7.245
Currency
bid
prices at
25 July
07:28
p.m. GMT
Descripti RIC Last U.S. Pct YTD Pct High Low
on Close Change Bid Bid
Previous
Session
Dollar 104.31 104.38 -0.05% 2.90% 104.45 104.
index 07
Euro/Doll 1.0852 1.084 0.12% -1.68% $1.087 $1.0
ar 829
Dollar/Ye 153.9 153.86 0.01% 9.09% 154.3 151.
n 96
Euro/Yen 1.0852 166.79 0.13% 7.31% 167.59 164.
83
Dollar/Sw 0.8806 0.8852 -0.53% 4.62% 0.8854 0.87
iss 78
Sterling/ 1.2861 1.2906 -0.33% 1.08% $1.2913 $1.0
Dollar 829
Dollar/Ca 1.3808 1.3808 0% 4.16% 1.385 1.37
nadian 97
Aussie/Do 0.6549 0.6582 -0.46% -3.92% $0.6582 $0.6
llar 511
Euro/Swis 0.9554 0.9594 -0.42% 2.89% 0.9598 0.95
s 22
Euro/Ster 0.8435 0.8397 0.44% -2.69% 0.8439 0.83
ling 95
NZ 0.5893 0.593 -0.68% -6.8% $0.593 0.58
Dollar/Do 73
llar
Dollar/No 11.0151 11.0265 -0.1% 8.68% 11.1381 10.9
rway 83
Euro/Norw 11.9548 11.953 0.02% 6.49% 12.0856 11.9
ay 317
Dollar/Sw 10.8111 10.7772 0.31% 7.39% 10.8685 10.7
eden 65
Euro/Swed 11.7314 11.6822 0.42% 5.45% 11.7786 11.6
en 784
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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