- Less aggressive remarks from BOJ officials
- Markets await US inflation data
The yen fell in Asian trade on Tuesday against a basket of major rivals, extending losses for the second day against the dollar and about to touch two-week lows, as the odds of additional Japanese interest rate hikes this year diminished.
Now investors await important US inflation data this week to gauge the path ahead for US monetary policies.
The Price
The USD/JPY pair rose 0.2% today to 147.52 yen per dollar, with a session-low at 146.91.
The yen closed down 0.4% on Monday against the dollar, the fourth loss in five sessions, plumbing two-week lows at 148.22.
Bearish Remarks
Bank of Japan Deputy Governor Shinichi Uchida said the central bank won’t raise interest rates when the markets are unstable.
He said that given the current turmoil, the BOJ will prefer to maintain current levels of monetary easing unchanged.
Japanese Rates
Naturally, following the remarks, the odds of a BOJ interest rate hike for the third time this year tumbled considerably, which would likely reduce the pressure to unwind carry trades.
US Rates
According to the Fedwatch tool, the odds of a 0.5% interest rate cut by the Federal Reserve in September stands at 49%, with a 51% chance of a 0.25% rate cut.
Rate Gap
Investors have sold the yen mercilessly for months due to the massive interest rate gap between Japan and the US.
The rate gap created profitable opportunities, with traders borrowing cheap yen to invest in dollar assets with higher yields, the so-called Carry Trade.
However, after the BOJ and the Fed’s latest decisions in July, the rate gap between Japan and the US shrank to 525 basis points, the smallest such gap since July 2023.
And now investors expect the gap will shrink to 500 basis points by September as the Fed prepares a new rate cut.
The dollar stabilized against most major rivals on Monday as markets await important US data this week.
Wall Street was shaken heavily last Monday with massive selloffs amid concerns about a US recession, before regaining ground in later sessions.
Now investors await a batch of important data later this week to gauge the path ahead, including consumer and producer prices, industrial production, and retail sales.
On trading, the dollar index was mostly flat at 103.1 as of 21:00 GMT, with a session-high at 103.3, and a low at 103.09.
Aussie
The Australian dollar rose 0.2% against its US counterpart as of 21:20 GMT to 0.6585.
Loonie
The Canadian dollar fell 0.1% against its US counterpart to 0.7275.
Gold prices rose on Monday to fresh record highs as the dollar stabilized against most major rivals.
Wall Street was shaken heavily last Monday with massive selloffs amid concerns about a US recession, before regaining ground in later sessions.
Now investors await a batch of important data later this week to gauge the path ahead, including consumer and producer prices, industrial production, and retail sales.
Otherwise, the dollar index stabilized at 103.1 as of 21:00 GMT, with a session-high at 103.3, and a low at 103.09 .
Gold spot prices rose 1.5% as of 21:01 GMT to $2511.4 an ounce.
Most US stock indices gained ground on Monday as investors await important US data later this week.
Wall Street was shaken heavily last Monday with massive selloffs amid concerns about a US recession, before regaining ground in later sessions.
Now investors await a batch of important data later this week to gauge the path ahead, including consumer and producer prices, industrial production, and retail sales.
On trading, Dow Jones fell 0.1%5 as of 17:10 GMT, or 63 points to 39,434, while S&P 500 rose 0.2%, or 12 points to 5357, as NASDAQ added 0.5%, or 91 points to 16,837.
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