Yen starts the year with strengthening
2023.01.03 08:51
Yen starts the year with strengthening
Budrigannews.com – For starters, the yen is set on avoiding a disastrous 2022. Last year, it was the major currency that performed the worst against the dollar. On the other hand, on the second trading day of the new year, the yen is already at seven-month highs.
Since the Bank of Japan made an unexpected change to its bond-yield control last month, which allows long-term interest rates to rise more, the yen has increased by almost 7% against the dollar, reaching around 130.70. The move was made with the intention of reducing some of the costs of prolonged monetary stimulus.
The speculation that the BOJ, the world’s most dovish major central bank, may well reconsider its ultra-loose policy has been fueled by a report on Saturday that the BOJ was considering raising its inflation forecasts in January to show price growth close to its 2% target for this year and next.
As a result of all of this, the yen is one of the most popular trades early in 2023. The yen is still “deeply undervalued,” according to MUFG, even after the recent rebound, allowing for further gains. Pictet projects a dollar/yen exchange rate of 125 at year’s end, indicating a 4% increase in the value of the yen from its current levels.
In September, for the first time since 1998, Japanese authorities intervened in the market to support the yen, and they did so again in October, when it fell to a 32-year low of 151.94 per dollar. The advantage of knowing the past recommends they simply had to hold out somewhat longer for the yen’s recuperation.
After the holiday on Monday, the outlook for inflation and monetary policy will likely come back to the forefront when U.S. markets reopen. The December non-farm payrolls report is due on Friday, and the Federal Reserve’s December meeting minutes are out on Wednesday.
The closely watched jobs data in the United States alone suggests that the first trading week of 2023 will not be dull.
There is also a lot going on elsewhere.
A survey released on Tuesday found that China’s factory activity decreased significantly in December as a result of rising COVID-19 infections, which disrupted production and weighed on demand after Beijing largely removed restrictions on the virus.
Futures for U.S. stocks indicate a strong opening for Wall Street shares; European shares were up more than 1.5%, and London’s blue-chip rose more than 2% to its highest level since June.
It is evident that yen traders are not the only ones who want to move on from the difficult year 2022.
The following are important developments that could guide U.S. markets later on Tuesday:
– U.S. December final PMI due for release.
– UK manufacturing ends 2022 on a low as orders shrink.
– Brazil markets tumble on Lula’s first full day in office.
– Inflation in key German states eases for second month.
More Oil falls due to China’s economic weakness
