- Curry-yen dismantling slows due to interest rate gap
- Prospects of a US interest rate cut down by 50 basis points
The Japanese yen rebounded in the Asian market on Friday against a basket of major and minor currencies, as part of attempts to recover from a two-week low against the US dollar, despite this rise, but the Japanese currency is in the process of suffering its second consecutive weekly loss, amid the slowdown in the dismantling of curry-yen deals, due to the decline in the prospects of narrowing the interest rate gap between Japan and the United States.
Less aggressive comments from the recent Japan Bank have reduced the odds of a third increase in Japanese interest rates this year, while strong economic data in the United States has reduced the prospects of a US interest rate cut by about 50 basis points in September.
Price overview
• The exchange rate of the Japanese yen today: The dollar fell against the yen by about 0.4% to (148.74¥), from the opening price of today’s trading at (149.28¥), and recorded the highest level at (149.34¥).
• The Japanese yen ended Thursday’s trading down by 1.3% against the US dollar, in the second consecutive daily loss, and recorded a two-week low of 149.40 yen, due to the release of strong data on retail sales and jobless claims in the United States.Weekly trading throughout this week’s trading, which officially ends when settling prices today, the Japanese yen is down so far by about 1.5% against the US dollar, in the process of incurring its second consecutive weekly loss.
Japan Bank Deputy Governor Shinichi Uchida said last week that the central bank will not raise interest rates when financial markets are unstable.
Given the sharp volatility in domestic and external financial markets, it is necessary to maintain current levels of monetary easing for the time being.
The above comments reduced the odds of Japan Bank raising interest rates for the third time this year, which is expected to reduce pressure on the dismantling of Curry Trade deals.
American interest
- Retail sales rose more than expected in July, in the latest data indicating strong economic activity at the beginning of the third quarter of this year, in addition to a slowdown in jobless claims for the second week in a row.
- Following this data, according to CME Group’s Feed Watch: U.S. interest rate cut prospect pricing fell by about 50 basis points at the September meeting steadily from 38% to 22%, and pricing of cut prospects rose by 25 basis points from 62% to 78 Japan%. Which some had to dismantle.
Read also:The Australian dollar is likely to have a hard time against the US dollar: Citibank
The interest rate gap between the US and Japan has created a highly lucrative trading opportunity, with traders borrowing yen at low rates to invest in dollar-priced assets for a higher return, known as the ‘Curry Trade’ trade.
Following decisions by the Bank of Japan and the Federal Reserve in late July, the interest rate gap between Japan and the United States narrowed to 525 basis points in favor of US interest rates as the smallest gap since July 2023.
In light of the current possibilities, the gap is expected to narrow to only 500 basis points in September after the chances of narrowing the gap to 475 basis points decreased.
Chris Weston, head of research at Pepperstone, said: “U.S. growth is in a better position and the consensus once again shares the ‘soft fall’ thesis, so we expect the dollar to rise to 150 yen as the next level to watch.
While there are always risks that can impact, there is little in the data flow now to disrupt truly positive emotions in the short term.
What stock should you buy in your next trade?
With stock valuations soaring in 2024, many investors feel uncomfortable investing more money in stocks. Not sure where to invest your money now? Check out our proven portfolios and discover high-potential investment opportunities.
In 2024 alone, ProPicks’ AI identified two stocks that jumped more than 150%, 4 more that jumped more than 30%, and another 3 that rose more than 25%. This is an impressive record.
With portfolios specifically designed to follow Dow Jones, S&P, technology and mid-cap stocks, you can explore various wealth building strategies.
