U.S. dollar remained low while the Yen continued rallying
The dollar index plummeted by 0.5% to 103.75 earlier on Thursday, hitting its lowest level in a week. The currency traded little changed at 104.20 at last. On the other hand, the Japanese yen rebounded today, moving towards a four-month high against the USD. The Yen gained much this week thanks to the Bank of Japan’s unexpected decision about the bond yield controls.
The BOJ maintained its low rates policy thus far, unlike other major central banks, fearing the hiking rates would slow down economic growth. However, the bank changed its stance, causing the investors to flock to the Japanese currency.
The Yen surged forward by about 0.3% to 132.08 per USD today. It had already jumped to a four-month peak of 130.58 on Tuesday after the central bank announced that it would allow its 10-year bond yield to move 50 basis points on either side of its 0% target.
On the other hand, the U.S. dollar declined after climbing by 0.6% versus the Yen in the previous session. So far, the greenback has failed to regain the 3.8% loss that followed Tuesday’s news. Michael Brown, the analyst at Trader X, thinks that the Yen will continue gaining in the near term. According to him, the USD/JPY pair might move back towards the mid-120s, trading around 125 or 126, especially if the Bank of Japan becomes more hawkish.
In Europe, the common currency gained 0.1% at $1.0617 on Thursday. ECB Vice President Luis de Guindos stated that the bank might continue hiking interest rates at the current pace in the coming months to hinder still-rising inflation.
However, the British Pound shaved off 0.3% to $1.2063 after already losing 0.85% in the previous session. New data showed that Britain’s economy contracted in Q3 by more than analysts estimated.
How are the EM currencies faring?
Most major EM currencies rallied against the U.S. dollar. Stocks also skyrocketed to a one-week high today. Mexico’s peso and South Africa’s rand soared by 0.4% each. But the Turkish lira changed insignificantly ahead of its central bank meeting. Traders expect the bank to keep its policy rate unchanged.
On Thursday, Russia’s rouble plummeted to its lowest level since late April 72 against the greenback. Traders fear sanctions on Russian oil and gas will negatively impact the currency. Overall, the rouble declined by more than 15% this month.
The MSCI’s index for EM currencies inched up on Thursday. Despite that, it was still down 4.6% for the year. On the other hand, EM stocks rose, gaining 1.1% thanks to risk-on sentiment.
