Japanese yen remains strong as speculators anticipate a January interest rate hike from the BOJ.
On Monday, there is minimal movement of the Japanese yen (JPY) in relation to the US dollar (USD). The market’s belief that the Bank of Japan (BoJ) may hike interest rates in January after the release of Tokyo Consumer Price Index (CPI) inflation data last week is supporting the Japanese yen (JPY), which is why the USDJPY pair is holding steady.
Japan’s Jibun Bank Manufacturing PMI surpassed the previous 49.0 and anticipated 49.5 readings, coming in at 49.6.
The Jibun of Japan The Nikkei 225 fell to about 39,950 on Monday, ending two days of gains, after Friday’s Wall Street slump driven by rising Treasury yields and indications of more restrained interest rate cuts in 2025. The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against its six major peers, trades around 108.00. The Bank Manufacturing PMI reached 49.6 in December, slightly exceeding the flash estimate of 49.5 and improving from 49.0 in November. Despite being the highest level since September, the PMI signaled the sixth consecutive month of declining factory activity. The Nikkei 225 fell to about 39,950 on Monday, ending two days of gains, after Friday’s Wall Street slump driven by rising Treasury yields and indications of more restrained interest rate cuts in 2025.
US dollar still weak with the 2-year and 10-year Treasury rates at 4.32% and 4.62%, respectively.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against its six major peers, trades around 108.00. The Bank Manufacturing PMI reached 49.6 in December, slightly exceeding the flash estimate of 49.5 and improving from 49.0 in November. Despite being the highest level since September, the PMI signaled the sixth consecutive month of declining factory activity. On Monday, bond yields decrease in value. As of this writing, the yields for the two-year and ten-year periods are 4.30% and 4.59%, respectively.
Growing predictions that the US Federal Reserve (Fed) would lower interest rates less frequently next year should help the US dollar. The Fed’s hawkish turn is still being processed by traders. At its December meeting, the Fed lowered its benchmark interest rate by a quarter point, and the most recent Dot Plots suggested two rate cuts in 2019.
The headline Inflation in the Tokyo CPI increased from 2.6% in November to 3.0% YoY in December. In the meantime, the Tokyo CPI, which does not include Fresh Food and Energy, rose 2.4% YoY in December after 2.2% the month before. In December, the Tokyo CPI, which does not include fresh food, increased 2.4% year over year, a small greater than the 2.2% achieved in November but less than the anticipated 2.5%.
Japan’s Finance Minister Katsunobu Kato stated on Friday that he has witnessed recent sharp and biased foreign exchange (FX) movements.
Japan’s Finance Minister Katsunobu Kato stated on Friday that he has witnessed recent sharp and biased foreign exchange (FX) movements. The authorities would take appropriate action against excessive fluctuations in foreign exchange, Kato added.
The Bank of Japan (BoJ) announced plans to modify easing measures if economic conditions match expectations in the Summary of Opinions from its December monetary policy meeting, which was released on Friday. While one member of the BoJ board underlined the significance of tracking the progress of wage negotiations, another underscored the necessity of closely examining statistics in order to identify any shifts in monetary support.
The potential of gradual rate hikes if inflation trends align was reaffirmed in the Bank of Japan’s October meeting minutes, which were issued this Tuesday. current projections, possibly reaching 1.0% by the end of fiscal 2025. The Minutes also highlighted budgetary measures to combat deflationary pressures, wage-driven economic growth in the face of local and international uncertainties, and a cautious stance to monetary policy.
BoJ Governor Kazuo Ueda stated earlier this month that the central bank anticipates the Japanese economy will get closer to meeting the BoJ’s 2% inflation objective in a sustainable manner the following year. Ueda continued, “The timing and pace of adjusting the degree of monetary accommodation will depend on developments in economic activity and prices as well as financial conditions going forward.”
