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The super dollar strengthens: fear that the Bank of Japan will intervene in its currency market

The super dollar strengthens: fear that the Bank of Japan will intervene in its currency market

The panorama of the global financial market is marked this Monday by strength of the dollar, which maintains the yen near multi-decade historical lows, although the possibility of monetary intervention by the Japanese authorities contains the rise of the greenback.

The yen makes a slight recovery during the day and stands around 151.24 per dollar, after having hit a four-month low last week, placing it within a step of the 32-year low of approximately 152 per dollar, recorded in 2022.

Japan’s top currency diplomat says today that the current weakness of the yen does not reflect economic fundamentals, joining increasingly frequent warnings from government leaders about a falling currency.

These movements come after the historic increase in interest rates by the Bank of Japan (BoJ) at its monetary policy meeting in March, a decision that had already been anticipated by the authorities. In addition, traders believe that interest rates in Japan will remain low for a considerable time, thus maintaining the marked differences with those in the United States.

Carol Kong, currency strategist at Commonwealth Bank of Australia, comments that “verbal intervention by Japanese authorities is turning the yen/dollar pair into strong short-term resistance.” Kong adds: “Markets are fully aware of the possibility of real intervention in the foreign exchange market by the authorities, which is limiting the advance of the dollar/yen.” She goes on to note that “there is a high risk of intervention to prop up the yen if the dollar/yen ratio rises significantly, possibly to 155 points. It is still considered a barrier.”

Dollar vs. other currencies

The change in the outlook for global interest rates, following a series of central bank meetings, revitalizes the dollar, with the expectation that the Federal Reserve is in no rush to reduce rates compared with other central banks.

100 dollars with failure

Bets on a June rate cut by the European Central Bank (ECB) and the Bank of England (BoE) are rising significantly after the Swiss National Bank became the first major central bank to do so last week. This puts pressure on their respective currencies, with the euro trading around $1.0817, near three-week lows.

The pound sterling shows a slight rise of 0.08%, reaching $1.26115, after having fallen more than 1% last week following signals from the Bank of England pointing to monetary easing.

Chris Weston, head of research at Pepperstone, notes that “the Bank of England and the ECB have fueled expectations of a possible cut in June, and even the Bank of England’s May meeting suggests it could be a policy meeting.” “. In contrast, while market expectations also point to the Federal Reserve beginning its easing cycle in June, a string of strong U.S. economic data is raising doubts about the likelihood of three rate cuts this year. The dollar index is stable at 104.34, after posting a weekly increase of almost 1% last week.

On the other hand, the Australian dollar shows an increase of 0.1%, reaching $0.6521, while the New Zealand dollar falls slightly to $0.5993, after having reached four-month lows earlier in the session . Both exchange rates benefit from the rise in the yuan, as they are often used as liquid substitutes for the Chinese currency. ANDThe yuan experiences a strong rebound today, driven by suspicions of dollar sales by state banks and by the firm official guidance set by the Chinese central bank, thus reversing its sharp fall at the end of last week.

The Chinese currency is facing pressure due to growing market expectations for further monetary easing to shore up the world’s second-largest economy. In the domestic market, the yuan shows an increase of approximately 0.3%, reaching 7.2083 per dollar, while in the foreign market it rises more than 0.3%, reaching 7.2492 per dollar.

Source: Ambito

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