Japanese yen slides further against dollar on BoJ policy divergence

The Japanese yen fell to a new 20-year low against the dollar on Wednesday, driven by expectations that the Bank of Japan will defy global trends and leave monetary policy loose.

The yen fell 1.4 percent against the US currency, moving it above 134 yen to the dollar. It has fallen by about 4% this month and in recent days has gone to its weakest levels since 1998.

The move came after the governor of BoJ Said consumers had become “more tolerant” of rising prices, comments he later recalled. Speaking at the FT’s global conference room event, Haruhiko Kuroda said that the weakening of the yen would increase the profits of Japanese companies.

In stark contrast to other major central banks, the BoJ did Decided against tightening monetary policy in the previous months.

Meanwhile, U.S. and eurozone government bonds fell in price on Wednesday as investors forecast a bleak outlook for central bank interest rates and inflation.

Before a US Inflation The May report on Friday, the 10-year yield on the Treasury bill, which bases global fundraising costs and has doubled since January, added 0.05 percentage points to 3.2 percent as the debt instrument fell. Economists predict that the price to the US consumer rose by 8.3% last month, in line with the rate of increases from April.

In the last two days, both the World Bank and the OECD based in Paris Cut their global growth forecasts Because of the war in Ukraine and higher energy prices.

As growth slows, rising inflation is pushing big central banks to raise borrowing costs and retreat huge financial incentive programs introduced in the early stages of the corona crisis in 2020, when investors have difficulty understanding the implications for asset prices.

“We had a huge financial intervention and we’re just starting to see it calm down,” said Roger Lee, head of equities at Investec. “The idea that the market will put it right seems very optimistic.”

The European Central Bank is expected on Thursday to signal a significant shift from its prevailing policy of keeping interest rates below zero, with markets expecting the bank’s primary deposit rate to return to positive territory by September. The ECB introduced negative rates in 2014 to stimulate lending and expenditure and has not raised credit costs since 2011.

The 10-year yield on Germany’s Bund, a measure of the eurozone’s debt costs, added 0.07 percentage points to 1.35%, the highest since 2014.

Italy’s parallel bond yield rose 0.07 percentage points to 3.48%, having nearly tripled since the beginning of the year, with traders expecting weaker eurozone countries to face economic recession and higher debt costs.

In the stock markets, the Wall Street S&P 500 stock index fell 0.3% in the early afternoon in New York, after showing gains during the last two sessions. The high-tech Nasdaq Composite traded unchanged.

Europe’s regional stock index Stoxx 600 fell 0.6%, with banks and industries being among the worst performing sectors, with investors weighing the implications of higher rates on economic growth and the weakest borrowers in the eurozone.

Elsewhere, the Hong Kong Hong Kong Index has added 2.2%.

Brent oil, the oil index, rose 2.2 percent to $ 123.24 a barrel.

Japanese yen slides further against dollar on BoJ policy divergence Source link Japanese yen slides further against dollar on BoJ policy divergence

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