Dollar depreciates against major currencies While the Yen soared more than 3%, it hit a four-month high against the dollar. After the Bank of Japan (BOJ) surprised the market by announcing an extension to the government bond yield frame today.
As of 7:05 pm local time, the dollar index, which measures the greenback against a basket of six major currencies, was down 0.68 percent to 104.01, while the greenback was 0.27 percent lower to 1.063 against the euro and fell 3.054% to 132.75 yen after falling to 132.68 yen, the lowest level since mid-August.
Investors are worried that Japan will turn to tightening monetary policies following in the footsteps of central banks around the world after the BOJ announced a widening of its 10-year government bond yield curve.
Although the BOJ kept the short-term policy rate at -0.1% and held the 10-year government bond yield at 0% at today’s monetary policy meeting, the BOJ decided to extend the range of bond yields to move during the period -0.5 % to +0.5% of the original range of -0.25% to +0.25%
However, BOJ Governor Haruhiko Kuroda insisted the change was not a rate hike. but to improve the market mechanism
Kyodo news agency reported yesterday, citing a Japanese government source. The government is expected to negotiate with the BOJ to adjust its inflation target of 2% for more flexibility. After setting inflation targets at that level for almost 10 years
Sources show that Mr. Fumio Kishida, Prime Minister of Japan. will discuss the issue with the new BOJ governor in April next year. After taking over from the current BOJ governor, Haruhiko Kuroda.
The Japanese Government led by former Prime Minister Shinzo Abe made a joint statement with the BOJ in 2013 outlining its commitment to reach its inflation target of 2% in order to tackle the deflation problem at the time.
Analysts predict that If Japan adjusts the inflation target as mentioned above, it will be a factor that supports the appreciation of the yen. After being pressured to weaken for a long time by Japan’s ultra-accommodative monetary policy to stimulate the economy, which forced the BOJ to keep interest rates low. Contrary to central banks around the world raising interest rates to curb inflation.
Investors will be keeping an eye on the US Personal Consumption Expenditure (PCE) Price Index on Friday. Although analysts expect the PCE index to show that inflation has peaked.
Analysts surveyed expect the headline PCE index, which includes food and energy, to be up 5.5 percent in November from a year earlier. slowing by 6.0% in October.
On a month-on-month basis, the PCE headline index is expected to rise by 0.1% in November from 0.3% in October.
In addition, the basic PCE index, which excludes the food and energy sectors, is an important measure of inflation for the Federal Reserve (Fed) and is expected to rise 4.7 percent in November year on year. slowing by 5.0% in October.
On a month-on-month basis, the core PCE index is expected to rise by 0.2% in November, unchanged from October.
The PCE index is an inflation gauge that can detect changes in consumer behaviour. and covers prices for goods and services more broadly than the Consumer Price Index (CPI) data from the US Department of Labor.
