Yen strengthens for second day in a row
2022.12.21 00:43
Yen strengthens for second day in a row
Budrigannews.com – The Bank of Japan’s shocking move on Tuesday to adjust its control of bond yields, a slight departure from its ultra-easy monetary policy, caused the yen to ease on Wednesday, but it maintained most of its overnight gains against the dollar.
While maintaining the same broad policy settings, the BOJ decided to allow long-term yields to move 50 basis points in either direction of its 0% target—a wider band than the 25 basis point band it had previously imposed.
The yen fell 0.34 percent against the dollar on Wednesday to 132.15 per dollar. However, it was still within striking distance of the four-month high of 130.58 per dollar that it reached on Tuesday in a 4% spike.
Carol Kong, a currency strategist at the Commonwealth Bank of Australia (OTC:), stated that the BOJ’s policy change is still being absorbed by the currency market.
She went on to say that “the market has interpreted the decision as step towards an eventual pivot from the current ultra-dovish monetary policy” and that the yen may continue to appreciate in the short term.
Investors are worried about the slowdown of the global economy, sky-high inflation, and the actions of other central banks to raise interest rates.
It also comes during a year when the yen has been extremely volatile. In September, for the first time since 1998, the Japanese government intervened in the market to support it, and in October, when it weakened to a 32-year low of 151.94 per dollar, they did so again.
Haruhiko Kuroda, the governor of the BOJ, who will step down in April, made it clear that the change was not a prelude to a larger change to the policy for controlling the yield curve and an eventual departure from ultra-easy monetary policy.
Goldman Sachs (NYSE:) predicts that the BOJ’s next major policy decision will likely be a change in long- and short-term policy rate targets or the end of yield curve control altogether. analysts.
According to Junichi Inoue, head of Japanese equity at Janus Henderson Investors, there is likely to be some short-term volatility. However, he anticipated that the BOJ’s decision would be “very positive for (the) overall market as it will remove unreasonable prices,” such as the 150 yen to dollar rate.
After losing 0.6% on Tuesday, the, which measures the dollar’s value against the yen and five other major currencies, was up 0.154% at 104.110. The index is on the verge of suffering its worst quarterly loss in nearly a decade.
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The euro was at $1.0607, down 0.13 percent, and sterling was at $1.2164, down 0.14 percent for the day.
The Australian dollar lost 0.21 percent to $0.666 and 0.61 percent to $0.631. After suffering significant losses against the yen, the currencies of the Antipodes were wobbly as rising Japanese yields threatened to halt flows into normally crowded carry trades.
