Japanese Yen Strongens Against Dollar
Japanese Yen- The value of Japan’s money, the yen, went up a lot compared to the dollar, jumping by as much as 5 yen. This happened after it had reached its lowest point in 34 years on Monday. Traders say that Japan’s government stepped in to buy yen, which they haven’t done for 18 months.
Big changes in currency values started a week where currency traders might have a lot to do. The U.S. Federal Reserve will finish its two-day meeting on Wednesday, and there’s also the U.S. jobs report on Friday. Plus, there will be European inflation data all week, starting with Germany and Spain on Monday.
The dollar dropped to 154.4 yen after quickly falling from its highest point of 160.245 yen, which it hit earlier in the day.
The dollar was recently at 156.83 yen, falling by 0.94%. Trading in Asia was quieter than usual because of Japan’s Golden Week holiday.
Joseph Trevisani, a senior analyst at FX Street in New York, explained that the timing of the decision makes sense because there are fewer traders in the market at that time. This means that any action taken will have a bigger impact. That’s why they decided to make the move early in the Asian market hours—they can have more influence over it.
Japan’s top currency diplomat, Masato Kanda, chose not to say anything when asked if the government had intervened. However, traders mentioned that they did intervene, and the Wall Street Journal also reported that Japanese authorities had intervened, according to people who know about the situation.
The money markets were expecting Japan to step in and support the yen. This came after the yen dropped by over 10% compared to the dollar this year.
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The weekly report from the Commodity Futures Trading Commission revealed that big investors like hedge funds have been betting against the Japanese yen. In fact, they’ve increased their bets on the yen going down to the lowest level since 2007.
On Friday, the yen went up by about 3.5 yen. This happened after the Bank of Japan decided to keep things the same and didn’t give much hint about buying less Japanese government bonds. This action might have helped keep the yen from dropping further.
Japan’s central bank might be getting involved just before the Federal Reserve announces its policy on May 1. People think the Fed will likely not change interest rates, as shown by CME’s FedWatch Tool. This is because the job market is strong and recent inflation numbers were higher than expected.
Investors keep having to lower their hopes for how soon and how much the U.S. might cut interest rates this year. The different plans of the Bank of Japan and the Fed have made the yen less valuable.
Over time, because the Bank of Japan (BoJ) keeps its interest rates low while the Fed’s rates are higher, it’s hard for the Japanese yen to get stronger. The BoJ has been sticking to its low interest rate policy for a long time, which makes it tough for the yen to gain momentum and increase in value.
Furthermore, big central banks like the European Central Bank and the Bank of England might start reducing interest rates soon.
The dollar index dropped slightly to 105.86, while the euro rose a bit to $1.0701. Sterling got stronger, going up to $1.2529.
This week, there’s important data about how fast prices are rising in Europe. In Spain, prices went up by 3.4% in the last year, a tiny bit more than before. In Germany, prices also went up a little in April because food cost more and energy prices didn’t drop as much. This information helps the European Central Bank decide what to do next.
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