ACY Securities

Last Friday trading session, the USD-JPY currency pair witnessed a significant and noteworthy decline, primarily influenced by comments made by Bank of Japan (BoJ) Governor Ueda. Governor Ueda highlighted the escalating challenges in policymaking, particularly as we approach the fiscal year-end in March 2024.

The Bank of Canada's final policy update for 2023, as reported by Bloomberg, had a relatively muted impact on the performance of the Canadian dollar, particularly when compared to previous instances of BoC policy decisions throughout the year.

The recent surge in the strength of the yen has led to a noteworthy decline in the USD/JPY pair, breaching the crucial 146.00-level and breaking below the support established by the low on December 4th, recorded at 146.23.

The Dollar plummeted against the Japanese Yen to 143.45 in late New York after the Bank of Japan signaled that it would scrap its negative interest rate regime this month. The Japanese currency strengthened against all Rivals but most against the US Dollar.

The recent rebound of the US dollar over the past four trading days serves as a reminder that foreign exchange rates are relative, influenced by various factors. Although there's compelling evidence suggesting that the Federal Reserve's tightening cycle has concluded and the labour market may be slowing.

The Dollar Index (DXY), a favored gauge of the Greenback’s value against a basket of 6 major currencies, rebounded to 104.05, a key level (103.25 yesterday). Economic data released yesterday saw US JOLTS Job Openings decline to 8.73 million from 9.35 million previously.

If the net domestic fund demand remains at approximately the current level of -0.4%, and the Bank of Japan (BoJ) acquires JPY7 trillion worth of Japanese Government Bonds (JGBs), the macro fair value for the 10-year JGB would hover around 0.7%.

Yesterday, the Reserve Bank of Australia (RBA) maintained on interest rates, holding them steady at 4.35%. This decision followed a 25-basis points hike delivered in November.

Chair Powell provides the most definitive signal that the cycle of interest rate hikes for the USD has end. The US dollar has experienced continued weakness in the Asian trading session, persisting from the sell-off observed in the previous week.

A call by US investment house Morgan Stanley’s currency strategists for the Euro to slide to parity by the end of Q1 2024 saw the shared currency extend its fall against the Dollar to 1.0885 (1.0900).

The recent global shift in sentiment regarding inflation has had a limited impact on the mindset of MPC member Megan Greene. In a recent address in Leeds, Greene steadfastly advocated for an upward adjustment of the Bank of England's (BoE) key policy rate.

As we navigate through the final month of 2023, the significant depreciation of the US dollar remains a focal point in the financial landscape. Drawing parallels to the trends observed in November 2022, the current year has witnessed a notable 3.0% drop in the US dollar.