Japanese yen falls as the US dollar rises following the botched assassination of former US President Donald Trump.
The Japanese yen (JPY) fell on Monday as the US dollar (USD) strengthened amid increased risk aversion following the attempted assassination of former US President Donald Trump on Saturday. Analysts think that if this incident improves Trump’s chances in the forthcoming elections, it may fuel ‘Trump-victory trades,’ potentially strengthening the US dollar and steepening the US Treasury yield. curve, according to a Reuters report.
JPY may face volatility as a result of speculation regarding future Japanese government involvement.
The Japanese yen (JPY) may see volatility as a result of anticipation that Japanese authorities will intervene. The Bank of Japan (BoJ) issued data on Friday, estimating that Japanese authorities spent between ¥3.37 trillion to ¥3.57 trillion on Thursday to arrest the rapid depreciation of the JPY, as reported by Reuters.
The rally in the Japanese yen, which had been hanging near 38-year lows, began on Thursday as the US dollar (USD) fell following data suggesting a decrease in US consumer prices in June. This result has raised hopes that the Federal Reserve may decrease interest rates as early as September.
According to CME Group’s FedWatch Tool, markets now predict an 88.1% chance of The Fed lowered rates by 25 basis points at its September meeting, up from 72.2% a week earlier.
Daily Market Movers: The Japanese Yen may face volatility due to intervention threats.
Francesco Pesole, an FX analyst at ING, notes that Japan’s Ministry of Finance has changed its foreign exchange intervention policy. Following the soft US CPI reading on Friday, the USDJPY pair fell about 2%, a greater decrease than other USD pairs. The spike in JPY futures volumes appears to be consistent with signs of FX intervention.
UBS FX strategists note that speculative investors have near-record short positions in the yen. They think that if US economic data continues to point to a gentle landing, USDJPY may face some pullbacks.
BBH FX strategists emphasize the recent softening in US data poses questions their belief.
BBH FX strategists emphasize the recent softening in US data poses questions their belief that the backdrop of persistent inflation and high growth in the United States is essentially unchanged. They add that Federal Reserve policymakers are increasingly concerned about labor market problems.
Yoshimasa Hayashi, the Japanese Chief Cabinet Secretary, declared that he is prepared to use all forex-related actions. Hayashi stated that the Bank of Japan (BoJ) will determine the specifics of monetary policy. He expects the BoJ to take adequate measures to attain the 2% price objective in a sustainable and consistent manner, as reported by Reuters on Friday.
Shunichi Suzuki, Japan’s Finance Minister, highlighted Friday that fast foreign exchange (FX) movements are undesirable. Suzuki declined to comment on FX intervention and media claims of Japan’s FX rate checks, as reported by Reuters.
On Thursday’s statistics indicated that the US Core Consumer Price Index (CPI), which excludes volatile food and energy costs, increased by 3.3% year on year in June, compared to 3.4% in May and the same anticipated. Meanwhile, the core CPI rose by 0.1% month on month, compared to the predicted and prior figure of 0.2%.
On Wednesday, Federal Reserve Chairman Jerome Powell emphasized the importance of closely monitoring the weakening labor market. Powell also expressed confidence in the declining trajectory of inflation, echoing his statements on Tuesday that underlined the importance of further data to improve confidence in the inflation outlook.
