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May 9, 2016

Yen drops on intervention rumors, Dollar surges as Fed Dudley is optimistic on Rate hikes

Yen drops on intervention rumors, Dollar surges as Fed Dudley is optimistic on Rate hikes

Japanese yen dropped to a two weeks low against the dollar on Monday after Japan’s Finance Minister warned that Tokyo is ready to intervene in the foreign exchange market if necessary.

USD/JPY hit 108.38, highest level from April 28, and swayed around near 108.20 during Monday session, up 1.03% for the day. Last week, the dollar fell to 105.05 level, 18-month low against the Japanese Yen .
The USD index, which tracks the US currency against the changes of trade-weighted basket of six major currencies, rose by 0.14 percent to 93.96, bouncing off from lows Friday of 93.00 floor.
The Finance Minister Taro Aso hit the wires on Monday saying that Tokyo was ready to intervene in the foreign exchange market, if excessive strengthening of Yen will affect trade statistics and economic indicators of the country. Though, most traders still don’t expect monetary measures by Japanese authorities towards weakening of the yen.

At the end of last month the Treasury United States added Japan to the list of countries which are monitored for the policy of adjusting foreign exchange rates. It means that United States are worried about current monetary stance of BoJ and Japanese government, which lack of action or overly interventions may create problems on foreign exchange market.
In his report, the Minister of Finance noted that the current market of US Dollar – Japanese Yen is “well regulated ” and reiterated that all countries should abide by the commitments of the G20 and G7 on exchange rate policies. Markets saw in this statement a call for limiting currency intervention on the part of Japans government.
The yen strengthened after the outcome of the April meeting on determining monetary policy, where Bank of Japan refrained from implementing fresh quantitative easing, contrary to market expectations.

The strengthening of yen threatens the goals of BoJ to stimulate prices growth.
A demand for US dollar also rose after the head of Fed Reserve Bank in New York William Dudley said in Friday that it is reasonable to expect two more rate hikes this year, despite data showing that the growth in the number of new jobs in the United States in April was the lowest in the past seven months.
The yen also fell sharply against the euro, the EUR/JPY pair rose 1.05 percent to 123.43.
The single currency hardly changed against the dollar, the EUR/USD traded near key 1.14 level. Risk sentiments among EU investors and analysts have improved slightly in May, data showed on Monday, but worries about the prospects of the world economy continue to mount pressure.

Investor confidence index grew 1.2% from 5.7 to 6.2 in April, beating expectations of the growth to 6.1.
A separate account showed that in March the volume of orders in German industry rose more than forecast, at 1.9%, showing the largest increase since June due to high international demand.

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