Businessicy – On Monday, August 26, the Japanese Yen strengthened to its highest level in three weeks against the US Dollar (USD), as Federal Reserve Chairman Jerome Powell’s stern stance sharply contrasted with the hawkish tone of Bank of Japan Chairman Kazuo Ueda. According to Channel News Asia, the USD dropped by 0.59% to 143.56 Yen, marking its first decline since August 5, 2024. Previously, it had fallen by 0.25%.
Meanwhile, the British Pound remained stable against the US Dollar at $1.3215 after surging to $1.32295 on Friday, reaching its highest point in 17 months. The US Dollar also held near a 13-month low against the Euro. Furthermore, it fell close to levels last seen in March 2022 against the Pound Sterling, following comments from Bank of England Governor Andrew Bailey who suggested that it was too early to declare victory over inflation.
Bailey’s remarks indicated a less aggressive stance on UK interest rate cuts compared to the Fed’s signals. Tapas Strickland, Head of Market Economics at National Australia Bank, noted that despite Federal Reserve officials sounding increasingly dovish ahead of Jerome Powell’s speech at Jackson Hole, Powell used stronger language.
“Importantly, there was a gradual warning that might excite the market,” Strickland said.
The Australian Dollar weakened by 0.1% against the US Dollar to $0.6790 but remained close to Friday’s high of $0.67985, its highest level since July 11, 2024. The Chinese Yuan saw a slight increase against the US Dollar, reaching 7.1130 per Dollar in offshore trading, marking its strongest level since August 5, 2024.
Currency market analysts predict that the US Dollar will continue to weaken against the Japanese Yen over the coming months. This forecast is attributed to the carry trade conditions fund by the Yen, which could have significant room for expansion. Carry trade refers to operations where investors borrow in currencies with low interest rates and reinvest the proceeds in higher-yielding assets elsewhere.
According to CNBC International, senior EMEA market strategist at BNY, Geoffrey Yu, suggest that the weakening of the USD is expected to persist against several major currencies until the end of 2024. His comments followed another round of dollar selling on Tuesday, as market participants awaited the release of revised initial US labor data on Wednesday, August 21, 2024. The figures were fear to pose a risk of further decline for the US Dollar, according to analysts at Dutch bank ING.
On Wednesday, August 21, 2024, the US Dollar was trading 0.6% higher at 146.09 Yen around 11:50 AM London time, shortly after dropping below the closely watched 145 Yen level for the first time since January 6.
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Foreign exchange strategies have been highly popular in recent years, particularly as investors expect the Yen to remain cheap and Japanese interest rates to stay low.
“It depends on the currency pair. For Dollar-Yen, you know, pick a number, right? So, we’re happy to see it reach the 130 Yen level, at least by the end of the year, with more potential declines beyond that,” Geoffrey Yu said when asked about the extent of the dollar’s potential decline.
He added, “(The Yen) actually still remains very underheld, according to our data. For Euro-Dollar, I think USD 1.05 might be a more reasonable level, though it’s still quite aggressive by current standards. However, that would be my target by the end of the year, as data starts to shift towards the negative.”
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