BOJ Governor: Continuing Monetary Easing and Market Monitoring: In a monetary policy press conference held on Thursday,
Bank of Japan Governor Kazuo Ueda stated that the central bank
will continue with a flexible monetary easing policy and adjust interest rates in line with economic expectations and price targets.
Ueda discussed several important points, including market monitoring, the impact of yen movements,
and the influence of global economies on Japan’s economy.
In Thursday’s monetary policy press conference, Bank of Japan Governor Kazuo Ueda
emphasized that the central bank plans to continue adjusting the level of monetary
easing and interest rates to economic expectations and price objectives.
Below are the key points Ueda addressed during the conference:
Market Monitoring: Ueda stated that the Bank of Japan will continue monitoring financial and foreign exchange
markets and their effects on the economy and prices.
Impact of Yen Movements: He highlighted that yen movements have increased prices,
with companies showing greater interest in raising wages and prices.
Economic Recovery: Ueda noted that the Japanese economy
is recovering moderately despite some weaknesses in specific sectors.
Continued Easing: Ueda mentioned that the bank would adjust its policies
if necessary to achieve economic growth and inflation goals.
Influence of External Economies: He clarified that the bank will consider the impact of global economies,
particularly the U.S. economy, on Japanese economic activities.
Future Rate Hikes: Ueda stated that the Bank of Japan
may consider raising interest rates if confidence in achieving forecasts is sufficient,
noting that this decision will not rely on these factors alone.
Consumer Price Inflation: The Bank of Japan expects inflation rates
to align with targets in the second half of the period.
U.S. Economy: Ueda mentioned that reduced risks in the U.S. economy
allow for decisions based on traditional economic factors.
BOJ Governor: Continuing Monetary Easing and Market Monitoring
Asian Markets Rally Following U.S. Small-Cap Stock Surge: Asian markets saw a notable rise after Wall Street closed with gains,
as investors shifted their focus from major tech companies to stocks more sensitive to economic data,
including small-cap companies.
Hong Kong, China, and Australian stocks recorded gains, while Japanese stocks experienced volatility.
At the same time, U.S. stock futures fell slightly after the S&P 500 rose by 0.5% on Wednesday.
In contrast, the Russell 2000 small-cap index reached its highest level in nearly three years,
while the Nasdaq 100 only saw a modest increase of 0.1%.
Anticipation of Chinese Economic Data
Investors are eagerly awaiting Chinese economic data,
with figures set to be released on Friday expected to show
4.5% growth in the third quarter compared to last year,
according to a Bloomberg survey.
If this forecast holds, it would mark the slowest growth rate in six quarters.
Chinese President Xi Jinping has called on officials to make every
effort in the year’s final quarter to achieve the annual growth target of approximately 5%.
However, a series of press conferences this month,
which failed to provide details on new incentives,
has raised concerns that more than current efforts may be needed to drive growth.
The following key event will be a press conference by the Housing Minister on Thursday.
Movements of the Japanese Yen
In Australia, bond yields rose after the unemployment rate dropped to 4.1% in September,
contrary to Bloomberg’s economist survey, which had expected the rate to remain stable.
The U.S. 10-year Treasury yield also increased to 4%,
while the dollar index remained close to its highest since early August.
The Japanese yen stabilized on Thursday morning after declining against the dollar in the previous session.
Meanwhile, Japan’s exports unexpectedly dropped in September, raising some economic concerns.
Developments in the Semiconductor Market
Taiwan Semiconductor Manufacturing Company (TSMC) is scheduled to release its earnings on Thursday,
and the company’s results will be closely watched for any signs of slowing chip demand.
This is especially true after ASML reported disappointing
order figures and lowered its revenue forecasts for 2025 earlier in the week.
Shifts in U.S. Investor Trends
The gains in U.S. small-cap stocks on Wednesday indicate a shift by investors away from large tech companies,
which have significantly benefited from the AI boom, towards stocks that thrive under stable economic conditions.
David Russell of TradeStation stated,
“There may be a tendency among investors to move away from large tech companies,
which may not have sufficient catalysts to sustain their rise.”
He added, “With elections approaching and economic balance returning,
the long-anticipated shift from large companies to other firms may be closer than ever.”
Continued Momentum in U.S. Market
Traders continue to monitor U.S. corporate earnings. Morgan Stanley’s shares jumped 6.5% after its trading
and banking divisions posted revenues that exceeded expectations,
leading to a 32% increase in third-quarter profits.
United Airlines Holdings also saw its shares rise by 12% after reporting earnings that surpassed expectations.
The S&P 500 has already recorded 46 closing records this year,
and according to Goldman Sachs’ trading desk,
this momentum is expected to continue in the final months of 2024.
Scott Rubner, General Manager of Global Markets at Goldman Sachs,
expects the index to reach above 6,000 points by the end of the year.
Based on historical data dating back to 1928,
the average returns for the S&P 500 from October 15 to December 31 stood at 5.17%,
rising to nearly 7% in election years, indicating a potential level of 6,270 points by the end of the year.
In a client note on Tuesday, Rubner added,
“The selling wave in the stock market has paused,
and signs of a year-end rally are emerging as clients shift
from hedging against negative scenarios to focusing on positive outcomes,
with institutional investors now being forced into the market.”
He noted that professional investors are increasingly concerned about underperforming relative to benchmarks.
Updates on Commodity and Cryptocurrency Markets
West Texas Intermediate crude rose after a four-day decline ending Wednesday in the commodity markets. Gold remained stable after two consecutive sessions of gains.
Meanwhile, Bitcoin stabilized on Thursday morning after rising 1.7% on Wednesday,
reaching its highest level since July.
Asian Markets Rally Following U.S. Small-Cap Stock Surge
Oil Prices Steady Amid Middle East Tensions and Libyan Supply Expectations: Oil prices stabilized at the start of trading on the first day of the last quarter of the year,
as expectations of Libyan supply returning diminished the impact of geopolitical risks in the Middle East.
Oil Prices Steady Amid Middle East Tensions and Libyan Supply Expectations
Oil prices stabilized at the start of trading on the first day of the last quarter of the year,
as expectations of Libyan supply returning diminished the impact of geopolitical risks in the Middle East.
Brent crude for December traded near $72 per barrel, following a slight rise on Monday,
with West Texas Intermediate exceeding $68.
The Israeli army announced targeted strikes against Hezbollah targets in southern Lebanon.
Meanwhile, Libya is preparing to resume production after the two rival governments reached a compromise,
according to people familiar with the matter.
Global Brent crude has dropped by nearly 17% in the last quarter and is now down for the year.
Expectations that “OPEC+” will implement production recovery plans and a slowdown in
Even after last week’s massive stimulus plan, China has weighed on prices.
“OPEC+” is set to hold an online monitoring meeting tomorrow,
Wednesday, as the coalition prepares to increase production.
Russian Deputy Prime Minister Alexander Novak said last week
that the group would begin restoring supplies in December and that no new proposals were being discussed.
Jerome Powell: Fed to Cut Rates Over Time as Inflation Steadily Declines
Federal Reserve Chairman Jerome Powell stated that the central bank would lower interest rates “over time,”
reiterating that the overall economy remains strong.
Powell also reaffirmed his confidence that inflation will continue moving toward the Fed’s 2% target,
noting that economic conditions are setting the stage for further easing inflationary pressures.
Speaking at the National Association for Business Economics annual meeting in Nashville, Powell said:
“If the economy evolves as expected, policy will gradually shift towards a more neutral stance over time.”
He added: “But we are not on a predetermined path,”
indicating that policymakers would continue making decisions on a meeting-by-meeting basis based on new economic data.
A neutral policy is one that neither stimulates nor restricts the economy.
The current interest rate, which the Federal Reserve lowered to 4.75%-5% earlier this month,
is still restraining economic activity.
Bank of Japan Signals Pause in Rate Hikes Following Major Fed Cut
A summary of the Bank of Japan’s September meeting showed that
policymakers discussed the need to slow down rate hikes as volatile markets cloud the outlook,
reducing the likelihood of near-term interest rate increases.
The summary also highlighted how the U.S. Federal Reserve’s decision to significantly cut borrowing costs,
which came a day before the BOJ’s meeting on September 19-20,
raised concerns about the U.S. economic outlook.
One member said, “Uncertainty about the U.S. economy and the pace of Federal Reserve rate cuts has increased.
Attention must be paid to the possibility that these factors could negatively affect Japan’s yen’s exchange rate and corporate profits.”
The summary also revealed that even one advocate of future rate hikes called for patience in decision-making,
marking a shift from the previous July meeting when many
the nine-member board voted to raise rates to avoid the risk of extremely high inflation.
Oil Prices Steady Amid Middle East Tensions and Libyan Supply Expectations
This increase was driven by higher energy costs following the expiration of government subsidies for public utilities.
However, it fell short of economists’ expectations, which had forecast a 3.1% rise.
On a monthly basis, prices rose by 0.3%, aligning with expert predictions.
Decline effect
The report also highlighted a 10.8% increase in yen-denominated import costs,
reflecting the impact of the yen’s depreciation on inflation.
Additionally, electricity, gas, and water costs increased by 6.7% compared to the same period last year.
The Yen’s Decline
The yen’s decline this year has exacerbated inflationary pressures by increasing the costs of importing raw materials, food, and fuel. Following the Bank of Japan’s decision to raise the benchmark interest rate on July 31, Governor Kazuo Ueda stated that the authorities would continue to raise rates if economic growth and price expectations were met. His firm stance led to a rebound in the yen and a drop in stocks, prompting his deputy, Shinichi Uchida, to emphasize last week that the bank would be cautious about raising rates if financial markets were unstable.
Producer Price Inflation Continues to Accelerate in Japan
The Japanese Yen Above 150 Yen Barrier for the First Time in 5 Months: The Japanese yen rose widely in the Asian market on Thursday
against a basket of major and minor currencies, extending its gains for the third consecutive day against the US dollar.
The Awakening Continues: The Japanese Yen Above 150 Yen Barrier for the First Time in 5 Months
The Japanese yen rose widely in the Asian market on Thursday against a basket of major and minor currencies,
extending its gains for the third consecutive day against the US dollar.
It traded above the psychological barrier of 150 yen per dollar for the first time in five months,
thanks to more aggressive than expected results from the Bank of Japan’s monetary policy meeting.
The Bank of Japan raised Japanese interest rates for the second time this year to the highest range since 2008,
announced a quantitative tightening plan, and halved government bond purchases over two years.
Governor Kazuo Ueda stated that the benchmark interest rate has no specific ceiling during the current normalization cycle.
US Stocks Close the Last Sessions of July with a Rise, and the Dow Jones Achieves Monthly Gains
US stock indices rose during Wednesday’s trading
amid the assessment of corporate earnings results and the Federal Reserve statement.
The Federal Reserve announced on Wednesday that it will keep
the interest rate unchanged for the fifth time this year and the eighth time in a row,
at a range between 5.25% and 5.50%, a move largely in line with expectations.
This marks the ninth time the Fed has held the interest rate steady since March 2022,
when the monetary tightening cycle began.
The Dow Jones Industrial Average rose by 0.2% (equivalent to 99 points) to 40,842 points,
achieving monthly gains of 4.4%.
The highest level was 41,198 points, and the lowest was 40,655 points.
Bank of England Poised to Lower Interest Rates
The Bank of England is set to start lowering the base interest rate by 25 basis points to 5%, down from its 16-year high of 5.25%.
However, the decision is highly challenging,
Many investors believe the central bank might opt to keep rates steady due to inflation concerns.
Headline inflation remained constant at 2% in June, while the unemployment rate remained at its highest level since 2021.
Meanwhile, wage growth, despite slowing, remains high.
The Bank of England will unveil new growth and inflation forecasts.
The Japanese Yen Above 150 Yen Barrier for the First Time in 5 Months
The Yen’s Crazy Surge Threatened by Imminent Collapse: The Japanese yen, which has experienced a “crazy” surge, faces a significant threat of collapse in the near future.
The Bank of Japan (BOJ) and the Federal Reserve meetings will be crucial in determining the yen’s future trajectory.
The yen’srecent gains could vanish just as quickly if the BOJ does not raise interest rates.
However, unstable economic data and weak consumer spending may prevent the BOJ from making this move.
The Japanese yen, which has experienced a “crazy” surge, faces a significant threat of collapse in the near future.
The Bank of Japan (BOJ) and the Federal Reserve meetings will be crucial in determining the yen’sfuture trajectory.
The yen’srecent gains could vanish just as quickly if the BOJ does not raise interest rates.
However, unstable economic data and weak consumer spending may prevent the BOJ from making this move.
Investor Bets
Investors have flocked to buy the yenrecently,
betting that the interest rate differential between the United States and Japan will shift in favor of the latter.
They will face their moment of truth on Wednesday.
The yenis holding onto a nearly 5% gain against the dollar before it began rising on July 11,
a move bolstered by talk of BOJ intervention in the market. Some investors warn that the surge is fragile,
as evidenced by the yen’squick retreat from gains after stronger-than-expected U.S. economic growth figures.
Probability of Raising Interest Rates
Swap markets indicate a 43% chance that the BOJ will raise interest rates by 15 basis points
by the end of its monetary policy meeting on July 31, signaling considerable caution.
Only 30% of BOJ watchers polled by Bloomberg expect a rate hike,
even though over 90% see it as a risk.
This makes yenbulls vulnerable, especially if the BOJ also disappoints expectations
with a significant reduction in bond purchases or if the Federal Reserve
does anything later that day to dampen hopes for U.S. rate cuts in the coming months.
The Crazy Rise
Nick Twidale of ATFX Global Markets, who has been trading the Japanese currency for a quarter of a century, said:
“This is a crazy rise for the yen.
The BOJ could spoil the party and not play its role in tightening policy.”
Twidale added that if the BOJ does not meet market expectations, carry trades,
which profit from interest rate differentials and have kept the yen weak,
“could come back strongly.” Others, from BlackRock to former central bank officials,
expect the BOJ to keep rates steady for longer.
Economic Data
Unstable economic data lends credibility to this view:
while a key index tracking the strength of Japan’s service sector rebounded in July,
a measure of factory activity contracted.
People familiar with the matter say weak consumer spending complicates the BOJ’s decision this week.
Market Expectations
Amir Anvarzadeh, a strategist at Asymmetric Advisors who has tracked Japanese markets for over thirty years, said,
“If the BOJ does nothing, the dollar could rise against the yenagain.”
Nonetheless, the yen rose 0.2% to 153.62 against the dollar at 9:07 a.m.
in Tokyo, following a third month of accelerating inflation in the Japanese capital.
Demand for the Yen
After last week’s significant move, Nathan Sowell,
managing director of foreign exchange trading at Citigroupin Singapore,
saw additional demand for bullish yen options. He said:
“It’s still too early to tell if this signals a long-term shift in investor sentiment,
so it’s more likely to be a tactical shift in positioning or short-term hedging activity for now.”
State of Uncertainty
Other traders note that some hedge funds have stayed out of the market amid uncertainty
about how much the currency can gain before the BOJ’s policy meeting this week.
If the BOJ does not fully meet expectations,
The yencould weaken to 158 against the dollar, according to Rodrigo Catril of National Australia Bank.
Support for the BOJ’s Stance
However, even if the BOJ tightens policy on Wednesday,
there is still reason to support its stance in carry trades.
In these, investors use Japan’s ultra-low interest rates to borrow in yen and invest in higher-yielding currencies.
The yen’simplied yields would still be about 90 basis points
lower after a rate hike than those of the Swiss franc,
an alternative funding currency for carrying trades.
U.S. Interest Rate Risks
There are also many risks associated with U.S. interest rates.
If the chances of the Federal Reserve cutting rates diminish, the Japanese currency could face pressure again.
Charo Chanana, head of currency strategy at Saxo Capital Markets, said:
“The yen could test 160 if the Fed does not signal
rate cuts in September and U.S. data gains strength again.”
The Yen’s Crazy Surge Threatened by Imminent Collapse
Rise of the Japanese Yen: The Japanese Currency, the yen, surged against most major and minor currencies last week.
This was due to the decline in U.S. bond yields, which supported the yen gains.
The yen moved away from its 38-year low thanks to the intervention
of the Japanese central bank in the foreign exchange market to halt the excessive weakening of the local currency.
Global gold prices fell during Monday’s trading as investors awaited comments from Federal Reserve officials and upcoming economic data.
Federal Reserve Chairman Jerome Powell and other officials are scheduled to speak this week.
The forthcoming data includes U.S. retail sales, June industrial production, and weekly jobless claims.
If retail sales are weak, it could reinforce the need to cut interest rates, which could help gold prices.
If gold surpasses $2,450, it may reach new record levels.
The U.S. Department of Labor’s Bureau of Statistics reported a 0.2% increase in the Producer Price Index
in June after remaining unchanged in May, exceeding the expected growth of 0.1% amid rising service costs.
Rise of the Japanese Yen
The Japanese yen surged against most major and minor currencies last week.
This was due to the decline in U.S. bond yields, which supported the yen gains.
The yen moved away from its 38-year low thanks to the intervention of the Japanese central bank
in the foreign exchange market to halt the excessive weakening of the local currency.
The yen topped the list of winning currencies last week, achieving its best weekly performance since late April.
New buying positions accelerated, along with the covering of short positions.
Instead of the Japanese central bank’s low liquidity and momentum strategy,
it has adopted a new approach based on solid liquidity and accelerating momentum.
The sharp drop in long-term U.S. Treasury yields supported the gains of the Japanese currency,
as more extraordinary U.S. inflation data increased the likelihood of at least two Federal Reserve rate cuts this year.
Expectations of No Significant Increase in British Inflation
According to Reuters, Swati Dhingra, a member of the Bank of England’s Monetary Policy Committee,
said on Monday that it is unlikely that inflation in the UK will rise significantly again due to weak demand.
She emphasized the need for the Bank of England to reduce borrowing costs.
Dhingra stated, “Now is the time to start normalizing interest rates so
that we can finally stop pressuring living standards in the way we have been trying to reduce inflation.”
She added that she does not see any kind of consumption boom,
and if we are to start moderating from the extremely high interest rates we are currently at,
it will take some time for this to happen
so that we can ease it and feed it into the real economy.
Finally, Swati Dhingra from the Bank of England emphasized that demand is too weak to allow inflation to rise sharply.
The Japanese Yen Remains Under Pressure: The Japanese yen fell to over 156 yen per dollar, hitting its lowest levels in a week. The dollar rose after a Federal Reserve official projected a more hawkish outlook on U.S. interest rates than markets had anticipated.
The dollar index rose to 104.7 on Tuesday, continuing the previous session’s gains
after Atlanta Federal Reserve President Raphael Bostic said
it would take some time before the central bank is confident that inflation will return to 2%,
reiterating that cutting interest rates once this year would only be necessary.
He added, “Our new stable state is likely to be higher than people have known over the past decade,
possibly returning to what we were in the ’90s and early 2000s.”
However, traders remained cautious about the timing and extent of the Federal Reserve rate cuts this year,
with expectations for rate cuts in September and November.
Investors are now looking forward to more central bank comments
and the latest Federal Open Market Committee meeting minutes this week to further guide expectations.
The dollar strengthened across all sectors, with the most notable buying activity against the Australian, New Zealand, and Japanese yen.
Japanese Yen Remains Under Pressure
The Japanese yen fell to over 156 yen per dollar,
hitting its lowest levels in a week as the dollar rose after a Federal Reserve official
projected a more hawkish outlook on U.S. interest rates than markets had anticipated.
This means the stark interest rate differentials between the U.S. and Japan
will continue to pressure the yen as carry trade remains attractive.
Meanwhile, markets were cautious about pushing the yen to new lows amid the ongoing risk of government intervention.
Japanese Finance Minister Shunichi Suzuki expressed concerns about
the negative impact of a weak currency on wage increases.
For further guidance, investors are now looking ahead to a series of economic reports in Japan this week,
including trade, inflation, and business activity data.
The New Zealand Dollar Stabilizes
The New Zealand dollar traded around 0.61 USD as traders prepared for Wednesday’s Reserve Bank of New Zealand’s interest rate decision.
The central bank is widely expected to leave the official cash rate at 5.5% for the seventh consecutive meeting.
Therefore, the market’s focus will be on whether it signals that rate cuts could begin
sooner than the mid-2025 start point highlighted in the February forecasts.
Last week, data showed that the country’s two-year inflation expectations fell to their lowest
level in nearly three years during the second quarter,
sparking speculation that the Reserve Bank of New Zealand might consider cutting interest rates later this year.
Decline of the US Dollar Index: The dollar fell against most major currencies during Wednesday’s trading
and extended its losses following the release of U.S. inflation data.
Gold prices rose during Thursday’s trading session, nearing the level of $2400 per ounce,
following a strong increase in the previous session, driven by weak dollar and bond yields.
This came after U.S. inflation data increased the likelihood of the Federal Reserve cutting interest rates as early as September.
Economic data showed a 0.3% increase in the Consumer Price Index in April,
after a 0.4% rise in March, which was lower than expectations that predicted a monthly price growth of 0.4%.
In contrast, retail sales stabilized last month, defying expectations that projected a 0.4% monthly increase.
Rise of the Japanese Yen
The Japanese yen rose in the Asian market on Thursday against a basket of major and minor currencies,
continuing its gains for the second consecutive day against the US dollar, reaching its highest level in ten days.
The rise of the Japanese currency is attributed to the current decline in U.S. yields.
The decrease in the yield of U.S. Treasury bonds over ten years reduces the yield differential between Japan and the United States,
making Japanese yen yields a target for investors seeking safe investments and financing deals.
This supports the rise in the Japanese yen’s exchange rate.
However, some of the yen’s current gains are tempered by the release of data
on Japan’s economic performance for the year’s first quarter.
The results were worse than market expectations,
weakening the pressure on the Bank of Japan to implement a tight monetary policy.
Decline of the US Dollar Index
The dollar fell against most major currencies during Wednesday’s trading
and extended its losses following the release of U.S. inflation data.
Government data released on Wednesday showed that the U.S. Consumer Price Index
rose by 3.4% annually in April, compared with 3.5% in March.
The core index, which excludes food and energy prices, slowed to 3.6% last month from 3.8% in March,
recording its slowest pace since April 2021.
The index rose by 0.3% in April after rising 0.4% in March,
while core consumer prices rose by 0.3% every month after rising 0.4% in the previous three months.
The annual inflation rate in the United States has significantly decreased
compared to its peak in June 2022, which was 9.1%.
The Japanese yen has hit its lowest level since 1990. This significant drop in the yen’s value marks a notable point in Japan’s economic landscape,
reflecting various domestic and international financial dynamics,
including policy decisions by the Bank of Japan and global market trends.
The Japanese yen has reached its lowest level since 1990, falling against the U.S. dollar to a 34-year low.
This has increased speculation about Japan intensifying its efforts to slow the currency’s decline.
The yen fell 0.3% against the dollar, surpassing the 151.95 level reached in October 2022,
a point that previously prompted intervention from Japan’s currency officials
who have issued stern warnings to foreign exchange speculators in recent months.
Masato Kanda, Japan’s Vice Finance Minister for International Affairs,
stated in a press release that the current yen depreciation does not
align with economic fundamentals and is speculation-driven.
He emphasised that Japan would take necessary measures against excessive market volatility,
leaving all options on the table.
Japan’s negative interest rates
Regarding Japan’s negative interest rates, investors anticipate that the interest rate
differentials between Japan and other advanced economies, especially the United States,
will remain significant even though the Bank of Japan has moved away from negative interest rates.
Until this policy shift, the Bank of Japan was the last institution globally maintaining sub-zero interest rates,
a factor that constrained the yen’s appreciation as investors sought higher yields from other currencies.
Bank of Japan Governor Kazuo Ueda has reiterated that the bank’s accommodative monetary policy will continue for now.
His comments further highlight the widening gap between Japan’s interest rates and those in the United States.
Following the Bank of Japan’s historic decision to abandon negative interest rates
on March 19, 62% of 47 analysts in a survey expected another interest rate
hike by the central bank by next October.
However, there was a variance in opinions regarding the timing of this move.
In 2022, Japan spent over 9 trillion yen ($59.3 billion) on three market interventions in September and October
to support the yen, with the first intervention occurring when the yen was significantly stronger than its current value.
The Japanese yen has hit its lowest level since 1990