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CFD Markets News and Forecasts — 23-06-2024
Japan's top currency diplomat, Masato Kanda, who will instruct the BoJ to intervene, when he judges it necessary, said on Monday that he will take appropriate steps if there is excessive forex move. However, Kanda declined to comment if recent forex moves are excessive.
Key quotes
Warns of negative economic impact from excessive forex movements.
To take appropriate measures if forex fluctuations are considered excessive.
US FX report has no impact on Japan's forex policy.
Maintains daily contact with global peers on foreign exchange.
States readiness to intervene if necessary.
Sees no consideration of specific levels for intervention.
Stands ready to intervene 24 hours a day if necessary.
Market reaction
The Japanese Yen (JPY) holds steady following the verbal intervention from Japan’s Kanda. At the time of writing, USD/JPY was trading at 159.85, gaining 0.02% on the day.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The current BoJ ultra-loose monetary policy, based on massive stimulus to the economy, has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation.
The BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supports a widening of the differential between the 10-year US and Japanese bonds, which favors the US Dollar against the Japanese Yen.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
New Zealand’s Trade Balance came in at NZD $-10.05B YoY in May versus $-10.22B prior, according to the latest data released by Statistics New Zealand on Monday.
Further details suggest that Exports increased to $7.16B during the said month versus $6.31B prior whereas Imports rose to $6.95B compared to $6.32B in previous readings.
Market reaction
At the press time, the NZD/USD pair is down 0.04% on the day to trade at 0.6155.
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
- AUD/USD trades on a softer note near 0.6640 on the firmer US Dollar on Monday.
- The flash US Composite PMI rose to a 26-month high in June amid rebound in employment, lifting the Greenback.
- The advanced Australia's Judo Bank PMI was softer than expected in June, weighing on the Aussie.
The AUD/USD pair trades in negative territory for the third consecutive day around 0.6640 during the early Asian session on Monday. The downtick of the pair is backed by the stronger US Dollar (USD) after the optimistic US S&P Purchasing Managers Index (PMI) data for June.
Business activity in the United States rose to a 26-month high in June amid a rebound in employment. S&P Global revealed on Friday that its flash Composite PMI rose to 54.6 in June from a final reading of 54.5 in May, the highest level since April 2022. Meanwhile, the Manufacturing PMI improved to 51.7 in June from 51.3 in the previous reading and was above the consensus of 51. The Services PMI increased to 55.1 in June from 54.8, beating the estimation of 53.7. The stronger-than-expected US PMI data provide some support to the Greenback and create a headwind for AUD/USD.
The Federal Reserve (Fed) officials emphasized that they will maintain a data-dependent approach as they need more confidence that inflation will move towards the Fed’s 2% target before they can cut rates. Investors are now currently pricing in nearly 64% odds of a Fed rate cut in September, according to CME FedWatch Tool.
On the Aussie front, the softer preliminary Australian PMIs from Judo Bank for June indicated fragility in the Australian economy and exerted some selling pressure on the Australian Dollar (AUD). However, the hawkish stance from the Reserve Bank of Australia (RBA) is likely to underpin the Aussie and cap the downside for AUD/USD in the near term. The RBA Governor Michele Bullock said during her latest press conference that the Board discussed potential rate hikes, dismissing considerations of rate cuts in the near term.
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