The yen exchange rate on the Tokyo foreign exchange market on the 18th was in the low 142 yen range to the dollar, a slight decline from the evening of the previous weekend. US Federal Reserve officials discouraged expectations of an early interest rate cut, leading to stronger dollar buying and yen selling. On the other hand, the Bank of Japan’s monetary policy meeting begins today, and the market is likely to be supported by yen buying in anticipation of any hint of policy revisions after the turn of the year.
- As of 8:20 a.m., the yen exchange rate was 142.25 yen against the dollar, down 0.1% from the previous weekend (141.98 yen as of 5 p.m. on the 15th).
- In overseas markets on the 15th, the price temporarily fell to 142.45 yen following the remarks of a senior Federal Reserve official.
Yukio Ishizuki, senior currency strategist at Daiwa Securities, said that while the dollar and yen will be difficult to move ahead of the announcement of the results of the Bank of Japan’s meeting on the 19th, “Governor Kazuo Ueda’s press conference on the same day indicates that negative interest rates will be lifted ahead of the January meeting.” There is a strong sense of caution that some kind of hint may be shown, and the yen is likely to receive support.”
In the US bond market on the 15th, the yield on two-year bonds, which is highly sensitive to policy interest rates, closed at around 4.44%, 5 basis points (bp, 1bp = 0.01%) higher than the previous day. New York Federal Reserve Bank President Williams cautioned that it is “premature” to consider a rate cut next March, and in the interest rate swap market, the probability of a rate cut by next March has fallen slightly to the 70% range.
New York Fed President William Williams says it’s ‘too early to talk about rate cuts in March’
This is a sign that there has been a respite from the pressure to sell the dollar after Fed Chairman Jerome Powell said in a press conference after the Federal Open Market Committee (FOMC) on the 13th that they had discussed when to start cutting interest rates. Euro selling due to concerns about the European economy also encouraged dollar buying. However, Mr. Ishizuki of Daiwa Securities pointed out, “The U.S. Federal Reserve’s president’s statement will not change the outlook for interest rates, and the momentum is in the direction of a weaker dollar.”
Although policy is expected to remain unchanged at the Bank of Japan decision-making meeting, there is a strong sense of caution that the negative interest rate policy will be lifted in January next year, and the yen is likely to be supported in the lead-up to Governor Ueda’s press conference on the 19th. . In December last year, the yen appreciated due to the Bank of Japan’s unexpected policy revisions, and there are concerns about an unwinding of the yen carry trade in which low-interest yen is sold and high-interest currencies are bought as the end of the year approaches.
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2023-12-17 22:06:00
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