Speculators lowered their expectations about the strength of the dollar’s exchange rate, after a cautious shift by the US Federal Reserve sparked a rush towards high-yielding currencies.
Demand for options contracts, which benefit from the rise in the value of the US currency, has fallen to its lowest level in more than three years, compared to those that achieve gains if the dollar declines, according to the one-month risk reversals index.
Meanwhile, expectations for the Japanese yen’s exchange rate strength rose to a 5-month high.
Repositioning
Data collected by the Credit Depository and Clearing Company revealed that the process of rapid reallocation of investments boosted trading in options contracts to its highest level this year the day before yesterday.
This is not surprising. After US Federal Reserve Chairman Jerome Powell said earlier last week that monetary policymakers aspire to lower interest rates during 2024, investors began to reconsider expectations and wonder whether the dollar can continue to rise.
In contrast, the Bank of Japan may soon begin to abandon its ultra-accommodative monetary policy, preparing the Japanese yen to rise again.
Sources familiar with the Bank of Japan’s plans indicated that officials probably will not adjust monetary policy when they meet next week.
Nearly two-thirds of economists who participated in a Bloomberg poll earlier this month expect the Bank of Japan to cancel the stable interest rate below zero by the end of next April.
The Japanese yen rose nearly 2% against the dollar last week, and the Bloomberg Dollar Spot Index fell 1.2%.
Source:
Economy of the East
2023-12-16 11:10:39
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