Japanese yen rises as traders expect the Bank of Japan to raise interest rates again soon.
The Japanese yen (JPY) rises for the second day in a row versus the US dollar (USD), boosted by hawkish sentiment toward the Bank of Japan (BoJ). Recent data showing increase in Japan’s second-quarter GDP strengthens the possibility of an interest rate hike by the BoJ in the near future.
Japan’s machinery orders increased by 2.1% month on month in June, exceeding the forecast 1.1% increase.
Japan machinery orders, a crucial measure of capital investment, climbed by 2.1% month on month in June. surpassing the expected 1.1% increase. Markets are now expecting Japanese inflation data later this week to provide more insight into the Bank of Japan’s monetary policy trajectory.
The US dollar falls as dovish Fedspeak enhances the prospect of a September rate drop.
The US dollar continues to fall in response to dovish statements from Federal Reserve (Fed) officials, which have raised expectations of a rate decrease by the US central bank in September. Furthermore, last week’s US economic statistics revealed that both the Producer Price Index (PPI) and the Consumer Price Index (CPI) indicate that inflation is slowing.
According to the Financial Times, President Mary Daly of the Federal Reserve Bank of San Francisco reiterated on Sunday that the US central bank should reduce borrowing prices gradually. Additionally, Austan Goolsbee, President of the Federal Reserve Bank of Chicago, warned that central bank officials should use caution when implementing a restrictive policy over an extended period of time.
Daily Market Movers: Japanese Yen rises owing to hawkish BoJ.
The Japanese yen (JPY) rises for the second day in a row versus the US dollar (USD), boosted by hawkish sentiment toward the Bank of Japan (BoJ). On Friday, US Housing Starts fell by 6.8% in July to 1.238 million units, following a 1.1% increase in June. Meanwhile, the University of Michigan’s Consumer Sentiment Index increased to 67.8 in August, the first increase in five months, exceeding expectations and moving up from 66.4 in July.
The US Census Bureau reported on Thursday that US retail sales increased 1.0% month on month in July, a remarkable turnaround from June’s 0.2% fall and exceeding the expected 0.3% increase. Furthermore, initial jobless claims for the week ending August 9 was 227,000, lower than the projection of 235,000 and down from 234,000 the previous week.
Japanese Economy Minister Yoshitaka Shindo noted that the economy is expected to gradually revive as salaries and incomes rise.
The Japanese yen (JPY) rises for the second day in a row versus the US dollar (USD), boosted by hawkish sentiment toward the Bank of Japan (BoJ). On Thursday, Japanese Economy Minister Yoshitaka Shindo noted that the economy is expected to gradually revive as salaries and incomes rise. Shindo also stated that the government will work closely with the Bank of Japan to develop a flexible macroeconomic policy.
Japan’s GDP increased by 0.8% quarter on quarter in Q2, exceeding market expectations of 0.5% and recovering from a 0.6% drop in Q1. This was the highest quarterly growth since Q1 2023. Meanwhile, annualized GDP growth rose to 3.1%, beating the market forecast of 2.1% and reversing a 2.3% drop in Q1. This was the strongest annual expansion since the second quarter of 2023.
In July, the US headline Consumer Price Index (CPI) climbed 2.9% year on year, slightly lower than the 3% growth in June and below. Market expectations. The Core CPI, which excludes food and energy, rose 3.2% year on year, slightly lower than the 3.3% increase in June but in line with market expectations.
Jane Foley, senior FX strategist at Rabobank, believes that this week’s succession of US data releases, together with next week’s Jackson Hole event, will give the market with stronger insights into US policymakers’ likely moves. However, their major forecast is that the Fed would decrease interest rates by 25 basis points in September and possibly again before the end of the year.
