The dollar has reached an almost 11-month high against the yen, causing traders to remain wary of potential intervention by Japanese authorities. The yen fell 0.17% to 148.66 per dollar, marking its lowest level since late October. The Bank of Japan (BOJ) kept interest rates at ultra-low levels and stressed the need to further assess data before raising rates. Market watchers view the 150 level as a tipping point that could trigger forex intervention by Japanese authorities. A weak yen would likely prompt renewed interventions, similar to those seen last year. According to FX analyst Esther Reichelt, the BOJ’s cautious stance on inflation has dampened the yen. The dollar index also firmed at 105.64, up 0.06% compared to its previous close.
Last week, the Federal Reserve kept interest rates unchanged at its policy meeting but indicated that rates would need to remain higher for longer than expected. Fed officials warned of further rate hikes in the future, leading to a 25% chance of a 25-basis-point increase at the November meeting, according to market estimates. Meanwhile, the Swedish crown increased by 1% against the euro, reaching an almost seven-week high at 11.7300. The boost in the crown is due to Swedish property group SBB securing an 8 billion crown ($719 million) cash injection and announcing a reorganisation of its business. Nick Rees, FX market analyst at Monex Europe, stated that this development is a positive sign for the Swedish economy.
The euro, on the other hand, has fallen 0.1% to $1.0633, approaching a six-month low of $1.0615 against the stronger dollar. The euro is expected to record a decline of approximately 1.9% for the month, its largest monthly fall since May, amidst growing concerns of a recession. A survey released today revealed that German business morale deteriorated slightly in September, declining for the fifth consecutive month and amplifying fears of a recession in the eurozone’s largest economy. This threat of a recession suggests that a further rate hike in the eurozone is becoming less likely and that the market will continue anticipating rate cuts for next year, putting pressure on the euro.
ECB policymaker Francois Villeroy de Galhau warned that the European Central Bank needs to be cautious about raising interest rates too high and should try to avoid a hard landing of the economy. Sterling also weakened by 0.17% to $1.2224 following a decline of over 1% last week. The Bank of England’s decision to pause its rate-hike cycle, coupled with unexpected data showing a slowdown in Britain’s high inflation rate, has contributed to the pound’s poor performance. Sterling is headed for a 3.5% fall in September, marking its worst monthly performance in a year.
Overall, the dollar has surged against the yen, prompting concerns of potential intervention by Japanese authorities. The euro has faced a decline due to growing recession fears, while the Swedish crown has strengthened on positive economic news. The pound has been affected by the Bank of England’s decision to pause rate hikes and a slowdown in inflation. Traders are closely monitoring these developments and their potential impact on the global currency market.
More detail via Yahoo! Finance here… ( Image via Yahoo! Finance )