Tag Archive: Bank of Japan
Neither the Threat of Intervention Nor a Possible US Government Shutdown is Derailing the Greenback
Overview: The US dollar is stabilizing a bit but
only after extending its gains initially It reached almost JPY149.20, while the
euro slipped to $1.0570 before recovering to straddle $1.06 in the European
morning. Sterling sank a little through $1.2170 but stabilized to return to
almost $1.2200. The Australian dollar tested last week's low slightly below
$0.6390 before resurfacing above $0.6400. The US dollar toyed with CAD1.3500,
where there is a...
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Yen Drops After BOJ Does Nothing and Says Little
Overview: The BOJ's failure to do anything or
further ideas that an exit of the negative target rate, despite the firm CPI
report helped the dollar recover the ground lost yesterday against the yen. The
focus has returned to "intervention watch" and the market continues
to press for the official pain threshold. Sterling is the weakest of the G10
currencies, off another 0.5% today following the BOE's decision not to hike
yesterday. The...
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Week Ahead: Thumbnail Sketch of Central Bank Meetings
The
week ahead is dominated by central bank meetings. Six of the G10 central banks
meets. The post-Covid monetary tightening cycle is ending. The start was not
synchronized, and neither will be end. It is tempting to think that those that
began the tightening cycle early will among the first to finish. Among emerging
markets that is true for Brazil and Chile, both of whom have begun cutting
rates. And Brazil is likely to deliver the second cut in...
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Greenback Bought on Pullback
Overview: The dollar was bought after yesterday's
pullback spurred by Japanese and Chinese comments and the tighter capital
controls from Beijing requiring permission to buy more than $50 mln. The
economic and monetary policy divergence continues to underpin the greenback. It
is firmer against all the G10 currencies and is mostly inside yesterday's
ranges. Most emerging market currencies are lower, led by central European
currencies. The Chinese...
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Euro and Sterling Slump on Poor PMI
Overview: Poor European flash PMI pushed on open
door, giving the market a new reason to do what it was doing and that buying the
dollar. The euro has approached important support around $1.08 and sterling is
approaching the lower end of its two-cent trading range (~$1.26-$1.28). The
greenback is consolidating against the yen and holding above JPY145. The
Chinese yuan is little changed while the Mexican peso is extending yesterday's
gains. Despite...
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UK Inflation Surprises to the Upside and Weighs on Sterling
Overview: The UK surprised with higher-than-expected consumer
inflation and budget deficit, and the odds of a 50 bp hike tomorrow edged
higher. Sterling has been sold on the news and is the weakest of the G10
currencies, off about 0.5%. The dollar is mixed with the euro, Swedish krona,
Canadian dollar, and Swiss franc posting small gains. Emerging market
currencies are lower, including the Chinese yuan, which is at new lows since
last November. The...
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The Greenback Stalls after Yesterday’s Surge as US Negotiators Move Closer to Last-Minute Deal
Overview: Yesterday's dollar surge has stalled. It is
consolidating its gains and is softer against all the G10 currencies. After
popping above JPY140 yesterday, there were no follow-through greenback buying
in Tokyo. Most emerging market currencies are also firmer, including the South
African rand, which plummeted by 2.8% yesterday on the back of the central
bank's warning of downside currency risks as it delivered a 50 bp hike. The
Chinese yuan...
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Yen Slumps on Cautious BOJ
Overview: The market took a dovish message away from
the Bank of Japan and sent the dollar above JPY136, its best level since March
10 and spurred a sharp rally in JGBs. Japanese equities led the rally among the
Asia Pacific markets. Europe has not been able to follow suit. It disappointed
with Q1 GDP (0.1% rather than 0.2%). The Stoxx 600 is of about 0.3%, leaving it
off about 1.3% this week, its first weekly loss since the middle of March. US...
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Concerns Over US Banks Rival Today’s Jobs Report
Overview: The unexpectedly large rise in US weekly
jobless claims, the largest since the end of last September and concerns about
the impact of the sharp rise in interest rates on the liquidity and value of
assets (bonds) owned by small and medium-sized banks saw the market unwind the
effect of Fed Chair Powell's comments. The yield on the US two-year note
slumped almost 20 bp to 4.87% yesterday and fell to 4.75% today before
stabilizing (~4.82%)....
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Ueda Day
Overview: Rising rates and falling stocks provided the
backdrop for the foreign exchange market this week. The dollar appreciated
against all the G10 currencies but the Swedish krona, which is still correcting
higher after the hawkish pivot by the central bank. The market looks for a
later and higher peak in the Fed funds rate. This coupled with the risk-off
sentiment helped the dollar extend its recovery after falling since last...
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Dramatic Swing in Sentiment Extends the Greenback’s Rally
Overview: A series of strong US high-frequency
data points after a poor finish to last year has spurred a dramatic shift in
market expectations. And talk among a couple of (non-voting) FOMC members of a
50 bp hike has provided added fodder. The greenback is extending its recovery
today against all the major currencies, with the Australian and New Zealand
dollars hit the hardest. Emerging market currencies have also been knocked
back. This is part...
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Yen Retreats Ahead of Formal BOJ Announcement Tomorrow and US CPI
Overview: A consolidative tone is mostly the theme of the day. The revisions to the US CPI announced before the weekend add to the uncertainty and focus on tomorrow's report. At the same time, investors watch ongoing air space activity that has led to a few objects being shot down over the US and Canadian airspace.
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A Day of Surprises
(I
am on a business trip and did not intend to post any analysis today. However,
there have been a number of unexpected developments that warrant some
commentary. Thanks for bearing with me.) Japanese press reports that the BOJ Deputy
Governor Amamiya turned down the opportunity to become the next BOJ governor. Instead,
next week, former BOJ board member Kazuo Ueda will be nominated. The market
reacted dramatically, taking the yen sharply higher...
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US Interest Rate Adjustment Post-Jobs is Over as the 2-Year Yield Backs Away from 4.50%
Overview: The capital markets have shrugged off the
more than 1% loss of the Nasdaq and S&P 500 yesterday and have jumped back
into risk assets. The stocks and bonds have been bought and the dollar sold. Chinese
and Hong Kong shares gained more than 1% today. Japan was mixed and Taiwan and
South Korean equites saw minor losses. Europe's Stoxx 600 is up over 1%. Nasdaq
futures are up nearly 1.2% while the S&P 500 is lagging slightly....
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Greenback Extends Recovery
Overview: The honeymoon for risk assets that began
the year ended with a bang at the end of last week with the monster US jobs
report and the rebound in the service ISM. Disappointing news from several large
US tech companies provided extra encouragement. The yen's weakness helped
Japanese stocks today, but the other larger bourses in the Asia Pacific area
were sold, with losses in Hong Kong, the CSI 300, South Korea, and Taiwan off
more than 1%....
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North America likely will Sell USD Bounce Seen in Europe
Overview: The failure of the Federal Reserve to push harder against the market's dovish views and the easing of financial conditions encouraged a risk-on trade that saw the dollar and yields slump and equities rally. There has been limited follow-through dollar selling today, and a small recovery ahead of the Bank of England and European Central Bank meetings.
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Euro Closed above $1.09 but Follow-Through Buying Limited
Overview: After
some intraday penetration, the euro finally settled above $1.09 yesterday. However,
follow-through buying has been limited and technical and option-related
resistance is seen in the $1.0940-50 area. The dollar is more broadly mixed
today, with the dollar-bloc and Norwegian krone leading the advancers. The
euro, yen, and sterling are nursing small losses near midday in Europe. The
recovery of US equity indices yesterday after gap...
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Euro Pokes Above $1.09. Will it be Sustained?
Overview: The Lunar New Year holiday has shut many centers in Asia until the middle of the week, though China's mainland is on holiday all week. The signaling of a downshift in the pace of Fed tightening by some notable hawks helped lift risk appetites ahead of the weekend and saw the
S&P 500 snap a four-day decline.
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The BOJ Surprises by Standing Pat
Overview: The BOJ defied speculation and stuck to its
current policy, which saw the yen sell-off sharply. The dollar rallied about
3.4 yen before falling back. The greenback is broadly lower against the other
G10 currencies. However, for the fifth consecutive session, the euro has
stalled around $1.0870. While UK headline inflation softened, mostly due to fuel,
core prices were unchanged, and this may have helped sterling extend its recent
gains to...
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Monday and Beyond
Monday Ranges: Euro: $1.0802-$1.0874JPY/$: JPY127.23-JPY128.87GBP: $1.2172-$1.2289CAD/$: CAD1.3353-CAD1.3418AUD: $0.6941-$0.7019MXN/$: MXN18.7313-MXN18.8566Rumors of an emergency BOJ meeting sent the dollar to its lows in Tokyo, slightly below the pre-weekend low (~JPY127.46). The on-the-run (most current) 10-year yield settled above the 0.50% cap and the generic 10-year bond has not traded below the 0.50% level since January 5. The market...
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