Business & Investment

Yen calms down and Australian company with improved sentiment before central bank meeting

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Tokyo — The yen was restrained while the risk-sensitive Australian dollar remained strong on Wednesday against the backdrop of a positive commodity market, bright US economic data and a positive risk mood from bright corporate earnings.

With the expectation that the Bank of Japan will show a strong commitment to maintain a monetary easing setting this week, despite many other central banks around the world trying to tighten policies to stop inflation. The Japanese currency was also hindered.

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The dollar remained strong at 114.20, up 0.37% in the previous session, and remained close to the four-year high of 114.695, which was mentioned a week ago.

“After the pandemic, the dollar has become the ultimate safe currency, but recently the yen’s beta (sensitivity) to stock prices has become stronger than the dollar,” said Shinichiro Kadota, senior FX strategist at Barclays.

Wall Street shares closed record highs on Tuesday, thanks to strong corporate earnings. US economic data released Tuesday was also bright, with consumer confidence rising unexpectedly and new home sales surged more than expected.

The Bank of Japan is widely expected to downgrade its economic valuation in its policy announcement Thursday, and the market is betting on a foreseeable future without rate hikes.

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The European Central Bank, which will hold its own policy meeting on Thursday, is also expected to delay policy tightening while curbing the euro.

The euro was $ 1.1594, down 0.4% so far this week.

Meanwhile, rising risk assets such as equities and commodities supported the Australian dollar and other commodity-related currencies.

The Australian dollar remained strong at $ 0.7506 after rising for the third straight day ahead of Wednesday’s domestic inflation data.

Emerging market currency indices reached their highest levels in almost six weeks.

However, the Canadian dollar lost some of its momentum as traders became tense. The Bank of Canada will ease investor expectations with policy announcements later that day.

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BoC could become the first central bank from G7 countries to end the stimulus from bond-buying programs in the pandemic era in a high inflation and recovering employment market.

The market expects to reduce bond purchases by $ 1 billion, while fully pricing with rate hikes by April next year.

“The market seems correct to expect a further C $ 1 billion reduction in the pace of asset purchases, but the more sensitive question is about the policy rate. Here, the Bank of Canada examines market prices. I think that’s almost impossible, Michael Schu, a research analyst at the Bank of Canada in New York, said in a report.

In emerging market countries where inflation is becoming more pronounced, the Central Bank of Brazil is also widely expected to raise interest rates by 100 basis points to 7.25% on Wednesday.

Some analysts say the Brazilian real is at risk of further decline unless the Central Bank of Brazil raises rates beyond market expectations.

In cryptocurrencies, Bitcoin was down almost 5% to $ 60,114, while ether was down 2.4% to $ 4,120.

(Report by Hideyuki Sano, edited by Shri Navaratnam)

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Yen calms down and Australian company with improved sentiment before central bank meeting

https://financialpost.com/pmn/business-pmn/yen-subdued-aussie-firm-on-improved-sentiment-before-central-bank-meetings Yen calms down and Australian company with improved sentiment before central bank meeting

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