Strong Recovery of Japanese Yen Weakens US Dollar
The Japanese Yen (JPY) experienced a remarkable rebound against the US dollar today, surging to the 160 level early in the day and reaching its highest point since October 1986. However, it later retreated to the 155 level against the US dollar. This sudden shift in the currency market followed the unexpected decision by the Bank of Japan (BOJ) to maintain interest rates, going against the general market expectations.
JPY’s Sharp Recovery Weakens the US Dollar
The JPY’s impressive recovery, coupled with reports of Japanese banks aggressively selling the US dollar, is believed to be a potential intervention by the Japanese government. In its latest monetary policy statement, the BOJ reaffirmed its commitment to bond purchases in order to sustain a healthy economic growth, while also revising its inflation forecasts upwards. Investors had been anticipating an intervention from Japanese officials due to the JPY hitting its lowest level in 34 years and depreciating by over 10% against the US dollar this year.
According to Reuters, Japan’s top foreign exchange diplomat, Masato Kanda, declined to comment on market speculation regarding Japan’s intervention in the forex market. Meanwhile, The Kobeissi Letter, a global capital market expert, highlighted the significance of a 2.5% fluctuation in one of the world’s major currencies within minutes, emphasizing its potential impact on the global market outlook. The timing of this event, occurring shortly after the BOJ’s decision to keep interest rates stable, further heightened its significance.
The weakening US dollar prompted a positive response in the stock markets, as the US Dollar Index (DXY) dropped to 105.46 and US Treasury yields decreased. Futures for major US stock indices, including the Dow Jones, S&P 500, and Nasdaq, showed signs of recovery. Similarly, Asian markets trended upwards as investors largely disregarded the latest inflation report, focusing instead on the upcoming monetary policy decision by the Federal Reserve (Fed) on May 1st.
Decline in DXY Raises Hopes Among Crypto Investors
The cryptocurrency market welcomed the decline in the DXY, potentially boosting positive sentiment for a market recovery. Particularly, the announcement by the US Treasury Department this week that it will provide up to 1.4 trillion dollars in liquidity for the second quarter of 2024 was well-received by those holding risky assets. However, the cryptocurrency market continues to be volatile, with news of liquidation ahead of the Fed’s monetary policy decision, and ongoing liquidations of long positions hindering market recovery.
According to Coinglass, Bitcoin (BTC) and Ethereum (ETH) witnessed significant liquidations in long positions amidst mixed signals from derivative markets. Recent data shows BTC trading at $62,241, while ETH is at $3,180.
Disclaimer: The information provided in this article should not be considered as investment advice. Investors should be aware of the high volatility and risk associated with cryptocurrencies and should conduct their own research.
