The US dollar fell slightly against the yen in the early hours of Monday, but at this point, there should be no doubt about the trend in this pair in the long term.
The US dollar fell slightly against the Japanese yen in the early hours of the trading session on Monday, but turned around to show signs of life. All things being equal, I think you have a situation where the 155 yen level will provide a significant floor in the market. It seems that we are trying to change things in the first hours of the New York session.
Hedge funds dramatically reduced their short positions against the yen, marking the biggest decline in more than a decade following suspicious market interventions by Japanese authorities to boost the currency, according to a report by Bloomberg.
The report cites data from the Commodity Futures Trading Commission in revealing that leveraged funds reduced their net short positions on the yen by 38,025 contracts during the week ending July 16, the largest decline since March 2011. Despite the downgrade, hedge funds remain generally bearish. on the currency with a net of 76,588 short contracts.
The hedge funds’ decline came after the Japanese government reportedly spent 5.64 trillion Japanese yen (35.8 billion US dollars) over two sessions to support the currency near its weakest levels since the 1980s, leading to a recovery against the dollar to the highest level seen since early June. year .
The yen’s recent strengthening also stems from growing expectations of an interest rate cut by the Federal Reserve in September and critical comments from Donald Trump regarding the yen’s weakness.
Japanese Yen Outperforms Dollar Amid Policy Volatility
Strong market reaction to the news that Biden is backing away from his re-election bid. Both the US yield curve and the EUR/USD pair are trading near where they were on Friday afternoon. While US policy could bring a lot of volatility this summer, the Japanese yen (JPY) He’s the one stealing the spotlight back into the foreign exchange market, noted Jane Foley, chief foreign exchange strategist at Rabobank..
The Japanese yen is the best performing currency of the Group of Ten over the course of a day. It is also the best performer in the Group of Ten over 5 days and in the month so far as the speculators have reduced their short positions. However, the 100-day SMA provided good support last week. As much as Trump’s trade indicates the strength of the US dollar, US policy will play a role in the USD/JPY forecast this year.
It remains unclear whether Bank Japan will see justification for action next week. The absence of hawkish signals from the Bank of Japan on July 31 could lead to another rally in the USD/JPY pair, especially if Trump’s position in US polls remains steady..
“While there is ample room for near-term volatility in the USD/JPY pair, we see better chances of a JPY recovery later in the year based on the assumption that Japan’s real wage recovery will allow the Central Bank of Japan to tighten up. We maintain our 6-month forecast at USD/JPY 152.00.”
Stock and dollar markets mixed after Biden withdraws from race
Stock markets were mixed and the dollar fell on Monday as Joe Biden’s decision to withdraw from the U.S. presidential race sparked new uncertainty.
Major stock indices in Tokyo, Shanghai and Sydney closed lower, although Hong Kong rallied thanks to health gains from Chinese tech companies.
Europe’s main stock markets rose strongly, led by Paris and Frankfurt, each recording gains of around 1.5 percent, close to halfway. Biden succumbed to weeks of calls for him to step down on Sunday following a poor debate performance that exacerbated questions about his health and Vice President Kamala Harris backed his succession.
The news has left traders wondering who will compete with Donald Trump in the battle to lead the world’s largest economy.
“The market instinct will indicate that the news adds a degree of uncertainty to the outcome of the November 5 election that did not exist last week.” However, “several weeks will pass… “Before anyone can reasonably determine whether the race for the White House is much narrower than it seems.”
Stocks in Asia fell on Monday after Friday’s losses on Wall Street and in Europe, where trade was dominated by the collapse of global computer systems.
As a result of a faulty update of antivirus software, airports, airlines, trains, banks, shops and even doctors’ appointments have been disrupted.
In Monday’s trading, which coincided with the start of the Farnborough Air Show in Britain, Ryanair’s share price fell more than 13 percent.
The Irish airline warned that despite rising passenger demand for its routes across Europe, revenue would continue to suffer from average airfares remaining lower than expected. While demand for travel has rebounded since the pandemic, travelers are reluctant to book long in advance.”
He cited “high interest rates” and “passenger holding on to a deal” as possible reasons why Ryanair and rival airlines needed to lower airfares at the height of the summer season.
