Economy

Euro falls below parity, but yen remains ahead of BOJ by Stocksak

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© Stocksak. FILE PHOTO – This illustration, taken July 17, 2022, shows U.S. Dollars and Euro banknotes. REUTERS/Dado Ruvic/Illustration

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By Rae Wee

SINGAPORE, (Stocksak), – The euro was below parity on Friday, as investors watched for a slowdown of future rate hikes from the European Central Bank. However, the yen was tracking for its best week since over two months before a key central bank policy announcement.

The euro was last 0.5% lower at $0.9960 after a more that 1% slide overnight. This was following a 75 basis point increase by the ECB, but a more dovish tone in its rate outlook.

The central bank dropped the reference to increasing rates “over several meetings” in its September statement. This was taken by traders to signify that a series large rate hikes was about to end.

“The ECB’s policy decisions were less hawkish that most expected. The surprise was largely due to Christine Lagarde’s comments that the ECB had already made significant progress in withdrawing stimulus policy,” Carol Kong, a currency strategist at Commonwealth Bank of Australia (OTC):

After an overnight gain of nearly 0.8%, the, which measures greenback against a basket currencies, was up 0.06% on 110.62.

Kong stated that he believes the gains in the U.S. Dollar mostly reflect the dovish ECB Meeting as well as the fall of euro/dollar.

The greenback fell earlier in the week due to hopes of a Fed pivot.

The yen bought 146.41 for $1 at the last time, and was on track with a nearly 11% weekly gain, its largest since August.

The Japanese authorities have reportedly intervened to support the fragile currency last Friday and Monday.

The Bank of Japan will announce its monetary policy decisions on Friday. They appear to maintain their ultra-low rates. This will further put pressure on the yen because of increasing interest rate differentials between Japan and the rest of the globe.

Kong, CBA said that he doesn’t see any case for a change in Bank of Japan’s Monetary Policy.

“Watch out! Another FX intervention in dollar/yen”

Japan intervened in foreign exchange markets to purchase yen last month for the first time since 1998. This was just after the BOJ decided to keep its super-loose policy stance.

Friday’s data showed that core consumer prices in Japan’s capital rose 3.4% in October compared to a year ago, marking the fastest annual pace of growth since 1989.

Sterling fell 0.12% at $1.155, but was on track to see a 2% weekly increase on optimism that Rishi, the new British prime Minister, would offer an antidote in the mess left by Liz Truss.

The price fell 0.9% to $0.64485 and the price dropped 0.11% to $0.5823. However, both seemed poised to continue their second consecutive week of gains.

News Source and Credit

Stocksak Editorial

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