Dollar is reinforced against Yen, due to possible interest rate hikes
On 18th November the dollar witnessed a significant rise against the yen. It continued its upward move after a senior Bank of Japan official was oblique about the tightening future monetary policies, but the timing is a bit unclear.
Kazuo Ueda, Governor of the Bank of Japan’s stance
Governor Kazuo Ueda of the Bank of Japan has stated that the economy was moving towards sustained inflation, which was fueled by the growth of wages, and cautioned alongside maintaining very low borrowing costs. He indicated a potential hike in rate cuts, possibly by the upcoming month; all this comes after Donald Trump`s presidential victory, which was weeks ago.
Though Ueda abstained from any perpetration of the December hike, mentioning the need to access multiple uncertainties, market analysts have indicated a lack of new signals, according to chief market strategist Marc Chandler at Bannockburn Global Forex of New York City, highlighting the emptiness of the support from the government.
Vague policies by the Bank of Japan causes the Yen’s downfall
The yen shows a decline as the Bank of Japan fails to show clear support to the market in terms of its new policies. In July, they anticipated a surprise rise in short-term rates of interest, which caused significant fluctuations in the market. After that, the investors expected the central bank to provide a proper communication service ahead of future decisions. The governor of the bank, Mr. Ueda, has been unable to offer any positive or strong signals or a possibility for a potential policy reversal. The investors have shifted their focus in response to the central bank`s indistinguishable stance.
The U.S market was recovered as the Yen weakened
It is seen that the markets of the United States have increased by around 0.17% to 154.6 yen, recovering after 13th November`s decline, when the Katsunobo Kato cautioned regarding the involvement to counter the large amount of exchange rate unpredictability. Despite the yen weakness, the U.S. market is still unfazed, and the traders are now maintaining the anticipation for a stable monetary policy by the Federal Reserve of States.
There is a chance for a rate hike of around 54 % in Fed quarter points by the meeting of 19th December, which remains unchanged after Ueda`s speech. This shows that the United States investors were now focused on local factors, such as consumer price rises and the unemployment rate while monitoring the policy shifts and interventions from the perspective of global economics.
Trump’s Victory Influenced Dollar Index Rise
It is seen that the dollar index has dropped by 0.5 % to 106.20, after the last week`s high of 107.07, as the European euro gained strong support with 1.0598 dollars. The index shows an expected rise, which comes after Trump`s victory, where it leads to higher U.S. tariffs, possibly fuelling up the inflation rates and the declining possibility of the Federal Reserve rate cuts.
However, a cautious situation arises regarding the global implications and acceptance of the U.S. trade policies. Senior European Central Bank officials have stated that there is a cautious situation over the economic damage new U.S. tariffs could impose on eurozone growth rather than the pressure of inflation. This shows that the U.S. trade decisions might get undulated through the global economies, which are also able to influence monetary policies.
Fed’s approach to rate cuts is the main focus
The recent statement passed by the Federal Reserve`s chairman, Jerome Powell, focuses on a cautious and measured way of rate cuts. In the U.S. economic data, where the National Association of Home Builders/Wells Fargo market index has shown a gain of around 46 in November, which is the highest point since April month, and it is also up by 43 during October.
So, this rise shows that the growing buoyancy among the builders that the most recent election results may lead to potential regulatory reforms and also help to boost residential construction. This improvement in the sentiments of the builder shows that the sector is anticipating a most favorable policy environment, despite the major economic uncertainties, and the Fed’s strategies are remaining in focus.
Trump’s pick for Treasury Secretary is under scrutiny of the market
The market is very much watchful regarding the newly elected Trump administration`s decision on the next Treasury secretary, while the reports are indicating that the former Federal Reserve`s governor Kevin Warsh or the billionaire businessman Marc Rowan are expected to take the oath.
Moreover, the sterling has recovered from 0.47 % to 1.2674 dollars after a downfall of 2.4 % last week, which was also the biggest weekly downfall since February 2023, which shows a cautious recovery in the market of fluctuations. The crypto market also fell after its strong move, where Bitcoin experienced a loss of 1.82 % with 90114.00 dollars.
