The yen resumed its strong rise against the dollar on Friday, boosted by expectations of a rate hike from the Bank of Japan, while Asian stock markets fell back, showing sluggishness the day after the Thanksgiving break on Wall Street . The Japanese currency once again climbed sharply against the greenback on Friday, rising above the symbolic bar of 150 yen to the dollar for the first time since mid-October. Around 06:30 GMT, it was trading at 150.05 yen per dollar (+0.98%), compared to more than 155 yen at the end of last week.
The Japanese currency had risen sharply at the start of the week, taking advantage of its status as a safe haven against a backdrop of renewed economic uncertainties following the announcement by American President-elect Donald Trump of prohibitive customs taxes targeting China, Mexico and Canada. But above all, the yen is benefiting from growing expectations that the Japanese central bank (BoJ) will raise its rates again in mid-December, after having already raised them twice this year, putting an end to long years of low rates. almost zero or even negative.
Expectations were further strengthened on Friday after the publication of stronger-than-expected inflation figures for the Tokyo capital region. This movement in monetary policy goes against the grain of the world’s major central banks, starting with the American Federal Reserve (Fed), which on the contrary has begun a gradual reduction in their rates. This contrast and the promise of higher-yielding yen assets attracts currency traders to the Japanese currency. Certainly, Japanese rates remain well below Fed rates, “a significant differential which does not work in favor of the yen”observes Daniela Sabin Hathorn, analyst at Capital.com.
But the reversal of dynamics changes the situation, she explains: while the surge in inflation had prompted the Fed and the European Central Bank in recent years to vigorously raise their rates to stem it, “the BoJ had left its rates unchanged at -0.1%, which led to a continued depreciation of the yen”. Today the trend is reversing, “the BoJ starting to admit that the Japanese economy is experiencing inflation due to internal factors, and gradually increasing its base rate accordingly”adds Ms. Hathorn.
Stock market decline in Tokyo, the strong yen weighs, Toyota tumbles again
The flagship Nikkei index ended down 0.37% at 38,208.03 points, and the broader Topix index fell 0.24% to 2,680.71 points. Trading was lackluster, due to a lack of signal from Wall Street, closed the day before due to the Thanksgiving holiday, and still haunted by the prospect of increased trade tensions. The rise in the yen weighed on the shares of exporting groups, whose sales could be penalized, such as Nikkon (-1.20%), Hitachi (-1.00) or Sharp (-2.31%). . The automobile manufacturer Toyota (-2.12%) could also suffer from future customs measures from the Trump government. It exports to the United States and produces in Mexico.
Chinese markets diverge
Chinese markets diverged at the end of trading, torn between the prospect of the Sino-American customs standoff, the possibility of American restrictions on chips that were less severe than feared, according to Bloomberg, and uncertainty over Beijing’s response. Around 06:30 GMT in Hong Kong, the Hang Seng index remained stable (+0.05% to 19,376.35 points). Conversely, the Shanghai composite index gained 0.86% to 3,324.19 points, and that of Shenzhen increased by 1.58% to 2,015.18 points. The stock markets remain suspended from any announcement from the American president-elect: “Concerns about US protectionist measures remain very strong, and it is possible to see short-term investors buying and selling securities at the slightest announcement, amplifying market volatility”observe experts from the financial media Nikkei. On the oil market, the price of a barrel of West Texas Intermediate (WTI) increased by 0.60% to 69.13 dollars, while that of Brent from the North Sea stood still (+0.03% to 73 .30 dollars).
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