USD/JPY hits 6-week high: Fed tightening expectations rise aga

17 godzin temu

Shigeru Ishiba has reignited market bets on the yen "carry trade" and pushed the currency to a six-week low in an apparent policy change just 36 hours after he was formally sworn in as Japan's new prime minister.
Usd/JPY closed up 2% on Wednesday. The yen extended its decline against the dollar on Thursday, briefly falling below Y147 to the dollar.
As of Thursday's close, the dollar was up 0.3% at 146.82 yen. In Asia on Friday (October 4), the dollar traded in a narrow range against the yen, currently trading around 146.87.

Hedge funds are betting that Japan will not raise interest rates for at least four months under Mr Ishiba and have begun to rebuild short positions in the yen.

Speaking with Kazuo Ueda, BOJ governor, on Wednesday, Ishiba said he hoped the economy would move towards ending deflation in a sustainable way against the backdrop of monetary easing and that the current environment was not appropriate for further interest rate rises.

I think Mr Ishiba's forthright comments suggest he has yet to recognise his potential influence on the market. The comments appeared to be a sharp departure from his previous support for the BOJ's more hawkish tone and efforts to "normalise" Japanese monetary policy after years of ultra-loose stance.

The sudden drop in the yen triggered a strong rally in Tokyo stocks on Thursday. The Nikkei 225 rose nearly 2 per cent, led by stocks that traditionally benefit from a weaker yen.

"Rightly or wrongly, the currency market took Ishiba's comments as a sign that he might be starting to lean towards a more dovish stance from the boj, so we are starting to see the yen carry trade come back," said a Tokyo-based currency trader.

The massive build-up of the yen carry trade, in which speculators borrowed yen to fund bets on other high-yielding currencies, was spectacularly unwinding in early August, triggering a rout in the Japanese stock market.

And don't read too much into Ishiba's comments, especially given his lack of experience making public comments on monetary policy and the fact that the new prime minister has called a snap election for later this month.
On Monday, on the first day of trading after Ishiba's appointment as prime minister, Japanese stocks plunged nearly 5 per cent.

At the same time, Ishiba does not want the yen to become too weak ahead of the election, as it would raise the cost of imports and households' perception of rising prices is negative.

Despite the new prime minister's dovish comments, I still forecast the BOJ will raise rates again in December and have not changed my forecast for the end of the year at 145 USD/JPY.

8 minut temu

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