Yen Surges as Bank of Japan Hints at End to Negative Rates
The yen experienced a significant jump on Monday following comments by Bank of Japan (BOJ) Governor Kazuo Ueda, fueling hopes that Japan may soon move away from negative interest rates. Meanwhile, the dollar slid in anticipation of this week’s crucial U.S. inflation reading.
The Japanese currency strengthened by 1.2 percent to 146.06 per dollar, reaching its highest level since September 1, propelled by Ueda’s weekend remarks suggesting the central bank could terminate its negative interest rate policy once it achieves its 2 percent inflation target.
In an interview with the Yomiuri newspaper, Ueda disclosed that by the end of the year, the BOJ may possess adequate data to determine whether negative rates can be terminated.
The yen has been under pressure against the dollar due to growing interest rate disparities with the United States. The U.S. Federal Reserve embarked on an aggressive rate-hike phase last year, while the BOJ has maintained a more dovish stance.
Takehiko Masuzawa, trading head at Phillip Securities Japan, noted, “It seems that Ueda’s comments were intended to stop the yen’s slide against the dollar. His comments are working almost the same as government intervention.”
In relation to the dollar, sterling saw a 0.4 percent increase to $1.2518, distancing itself from the three-month low it reached last week. Likewise, the euro gained 0.3 percent to $1.0731, ending an eight-week losing streak from the previous Friday.
The greenback, along with U.S. Treasury yields, experienced a surge last week following a series of resilient economic data, further fueling expectations that the Fed may raise rates in the near future.
According to ING strategist Francesco Pesole, whether the dollar will remain under pressure this week depends on its reaction to domestic drivers.
Benefiting from the weaker U.S. dollar, the Australian dollar and the New Zealand dollar both rose by around 1 percent. Additionally, they experienced gains due to the strength of the yuan.
The Chinese consumer price index returned to positive territory in August, while factory-gate price declines slowed, according to data released over the weekend. These figures suggest a decrease in deflationary pressures and signs of stabilization in the Chinese economy.
Matt Simpson, senior market analyst at City Index, commented, “Historically, we do not see China’s inflation print negative numbers for very long, although I thought we might at least get a few more deflationary figures than the single one served.”
Separate data from Monday revealed that Chinese banks extended 1.36 trillion yuan ($186.18 billion) in new yuan loans in August, surpassing analyst expectations and reflecting a significant increase from July.
More detail via www.theepochtimes.com here… ( Image via www.theepochtimes.com )