London (AFP) – The yen, weakened by the Japanese government’s easy monetary policy, hit a 38-year low against the dollar on Wednesday, sparking speculation about a new intervention by authorities.
Stocks were mostly lower despite a tech rebound that helped the Nasdaq edge into positive territory. The yen slid as far as 160.75 to the greenback.
Despite sliding through the 160 level, there was no indication that authorities had intervened to support the yen, said market analyst David Morrison at Trade Nation. “This being the case, it’s possible that traders work to push the yen lower in a renewed attempt to test the resolve of the Japanese authorities,” he said.
The Asian country’s top currency official has said authorities were ready to act 24 hours a day if the unit fell too far, but some investors suspect that the new trigger may be 165 yen to the dollar.
Billions were pumped in to support the yen after it hit a 34-year low of 160.17 in late April, but with limited effect. “If the Japanese finance ministry sees FX intervention as a waste of money, then they may let the yen continue to weaken, and leave it up to the BOJ (Bank of Japan) at the end of July to boost the yen with monetary policy tightening,” said XTB’s Research Director Kathleen Brooks.
Traders are also poring over any comments from the Bank of Japan, which many say has been too cautious in moving away from its ultra-loose monetary policy. It is tipped to hike interest rates next month and begin winding down its bond purchases that help keep borrowing costs down.
The euro also remained under pressure before weekend elections in France that polls suggest will see big wins for far-right and left-wing parties, pushing President Emmanuel Macron’s pro-business centrists into third. The Paris stock market finished the day down 0.7 percent. Eurozone peer Frankfurt fell 0.1 percent after a key survey showing German consumers are feeling more pessimistic heading into July, rattled by stubborn inflation and economic uncertainty.
Wall Street opened lower, but the Nasdaq pushed narrowly into positive territory during morning trading as tech stocks mostly climbed, although shares in chipmaker Nvidia succumbed to renewed selling and slumped 2 percent. On Tuesday, the Nasdaq and S&P 500 had both recovered from a recent sell-off thanks to AI chip titan Nvidia bouncing after three days of heavy selling.
XTB’s Brooks pointed to rising bond yields as causing trouble for equities as well as “concerns about the Fed pushing rate cuts further out to the future.” Investors were also looking ahead to the release Friday of the US personal consumption expenditures index — the Federal Reserve’s preferred gauge of inflation — hoping a softer reading would allow the bank to cut interest rates soon.
The Fed’s so-called “dot plot” guide for rates points to one cut before January — down from three predicted in March — though there is much debate on whether it will make two, or even none at all. Equity markets have been well supported this year by an expectation that officials will ease rates after a long-running campaign against sticky inflation.
However, the rally is showing signs of petering out owing to a string of data indicating the US economy and labour market remain strong, while investors are also concerned valuations may have gone too far, particularly among tech firms.
– Key figures around 1530 GMT –
New York – Dow: DOWN 0.1 percent at 39,062.70 points
New York – S&P 500: DOWN 0.2 percent at 5,460.24
New York – Nasdaq: UP less than 0.1 percent at 17,733.03
London – FTSE 100: DOWN 0.3 percent at 8,225.33 (close)
Paris – CAC 40: DOWN 0.7 percent at 7,609.15 (close)
Frankfurt – DAX: DOWN 0.1 percent at 18,155.24 (close)
EURO STOXX 50: DOWN 0.4 percent at 4,915.94 (close)
Tokyo – Nikkei 225: UP 1.3 percent at 39,667.07 (close)
Hong Kong – Hang Seng Index: UP 0.1 percent at 18,089.93 (close)
Shanghai – Composite: UP 0.8 percent at 2,972.53 (close)
Dollar/yen: UP at 160.68 yen from 159.68 yen on Tuesday
Euro/dollar: DOWN at $1.0683 from $1.0715
Euro/pound: UP at 84.63 pence from 84.43 pence
Pound/dollar: DOWN at $1.2622 from $1.2686
Brent North Sea Crude: DOWN 0.5 percent at $84.57 per barrel
West Texas Intermediate: DOWN 0.6 percent at $80.31 per barrel
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© 2024 AFP
