Stocksak: Dollar rally due to suspected yen intervention

© Stocksak. FILEPHOTO: A man walks underneath an electronic screen showing Japan’s Nikkei share prices index, inside a Tokyo conference hall on June 14, 2022. REUTERS/Issei Kato

Wayne Cole

SYDNEY (Stocksak), – On Monday, the U.S. dollar was on a rollercoaster ride against the yen as markets feared more intervention from Japan, while Asian shares surged on the hint that there might be a slowdown in U.S. rates hikes.

The dollar started in a bullish mood, with an early rush to 149.70yen. However, it quickly fell to 145.28 within minutes. Despite some wild swings, the dollar was last up 0.5% to 148.36.

According to The Financial Times, the Bank of Japan could have sold at most $30 billion Friday to help curb the yen’s weakness. This has pushed up the cost of imports for resources, in particular, and has exacerbated the problem of resource imports.

The Japanese authorities declined to confirm their intervention, but the price action strongly suggests that they did.

Sterling was also moved by news that Boris Johnson had withdrawn his bid for the British prime ministership.

This increased the chances that Rishi, the former finance Minister and preferred candidate of the market, would win power and reduce the political uncertainty surrounding the pound, at the very least, for a short time.

Sterling rose nearly a cent to $1.1402, the news was followed by sterling trading up 0.2% to $1.1328, as investors waited to see more details about the contest.

Equities extended their bounce that began Friday night in New York, on Friday when there was talk that the Federal Reserve was discussing how to slow down the pace of hikes. This could signal a fall at its November meeting.

The markets are still pricing for a 75 basis point increase next month but have reduced their bets on a matching move during December. The rate peak has dropped to 4.87%, compared with 5.0% at the beginning of last week.

Only the possibility of a less aggressive Fed helped increase 0.6% in Asia, while Nasdaq futures climbed 0.8%.

MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.7%. South Korea gained 1.2%, and Japan 1.5%.

Markets are currently watching data on the U.S. gross national product due Thursday and core inflation measures tomorrow. The economy is expected grow by 2.1% annually in the third quarter. However, the Atlanta Fed’s GDP estimate now is at 2.9%.

Sentiment will also face major earnings from Apple (NASDAQ), Microsoft, Google-parent Alphabet(NASDAQ:), and Amazon (NASDAQ :).

This week, the European Central Bank will meet and it is widely expected that it will raise its rates by 75 basis point. However, it is not clear if it will signal a further move in December.

“Although there is no expectation of a ‘dovish” policy signal, analysts at NatWest Markets stated in a note that they still favor a lower rate path than what the markets currently price.

“We project +50bp December and +25bp by early 2023 to a 2.255% peak,” they stated. They also added that “There is more uncertainty surrounding QT, where beginning Sales in Q1 2023 could be announced.”

The euro was steady at $0.9849 after briefly reaching $0.9899 in the early part of the session.

The possibility that U.S. growth slows down helped bonds to reduce their recent heavy losses of at 4.21%, compared to a peak of 4.337% for 15 years on Friday. [US/]

Gold was another beneficiary. It rose 0.2% to $1660 per ounce. [GOL/]

Oil prices rose a bit, with oil prices rising 27 cents per barrel to $93.77/barrel, and rising 34 cents for $85.39.[O/R]

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Stocksak Editorial

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