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The yen rallied after forecast-topping Tokyo inflation data boosted bets on a Bank of Japan interest rate hike Image: AFP
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Yen rallies on rate hike bets as equity markets swing

9 Comments

The yen rallied Friday after forecast-busting inflation data out of Tokyo boosted talk of another Japanese interest rate cut next month, while equity markets were mixed as traders weigh the economic outlook during a second Trump administration.

With Wall Street closed for the Thanksgiving break, there were few catalysts to drive business heading into the weekend and at the end of a rollercoaster month dominated by uncertainty in the wake of Donald Trump's election victory.

Traders are tracking developments surrounding the tycoon as he builds a hawkish cabinet and outlines his plans, including a threat to hammer China, Canada and Mexico with hefty tariffs on his first day.

Eyes were also on Japan, where figures showed consumer prices in Tokyo -- seen as a bellwether for the country -- jumped to 2.6 percent in November, well up from October and much more than expected.

The news ignited speculation the central bank will hike rates for a third time this year.

Expectations for an increase in borrowing costs have picked up pace in recent weeks after Bank of Japan Governor Kazuo Ueda said officials would have to tighten policy if the economy continued to perform in line with forecasts.

Friday's price data came as separate figures showed the jobs market remained tight. Bets on a rate increase have risen to more than 60 percent, according to Bloomberg News.

The yen rallied Friday, hitting the upper 149 level to the dollar for the first time in a month.

The currency was also supported by forecasts that the Federal Reserve will lower U.S .rates at its December meeting -- narrowing the yield differential and making the Japanese unit more attractive to investors.

The report "will probably strengthen the BOJ's conviction that inflation momentum is building, with its two percent target looking (increasingly) secure", said Taro Kimura, an economist with Bloomberg Economics.

The BOJ hiked rates in March for the first time in 17 years as it looked to move away from a long-running ultra-loose monetary policy.

However, a second, surprise lift at the end of July sparked turmoil on markets and led to a major unwind of the so-called "yen carry trade" in which investors used the cheaper currency to purchase higher-yielding assets.

The stronger yen weighed Japanese exporters and pushed Tokyo stocks lower on Friday.

Other Asian markets fluctuated, with Sydney, Seoul, Singapore and Taipei in the red and Wellington and Manila slightly higher.

Hong Kong and Shanghai flitted between gains and losses.

The euro edged up but remained under pressure owing to uncertainty over budget cuts to reduce France's huge deficit, and as Prime Minister Michel Barnier's government struggles amid tough opposition from the right and left.

Economic weakness in Germany in particular has also dampened enthusiasm in Europe.

Oil prices diverged after the OPEC+ alliance postponed a weekend meeting to December 5, with analysts saying there were signs of disagreement among the group over plans to increase output.

Bitcoin was sitting at about $96,500, having suffered a big drop at the start of the week following its worst run since Trump's electoral success.

Still, it is widely tipped to top $100,000 on expectations the new president will ease restrictions on the digital currency market.

© 2024 AFP

©2024 GPlusMedia Inc.

9 Comments
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HONG KONG

The yen rallied Friday after forecast-busting inflation data out of Tokyo boosted talk of another Japanese interest rate cut next month

That is a mistake in the article. Not a rate cut but rate hike.

7 ( +7 / -0 )

Yep.

1 ( +3 / -2 )

The currency was also supported by forecasts that the Federal Reserve will lower U.S .rates at its December meeting -- narrowing the yield differential and making the Japanese unit more attractive to investors.

Less unattractive, is more apt. It’s not like it is attractive to investors.

1 ( +2 / -1 )

¥100 gets you 0.66 cents. Hardly inspiring.

1 ( +5 / -4 )

Calling this a rally is the testament of how desperately plunged yen is valued at.

2 ( +6 / -4 )

BOJ out of options, after record US Treasury sales this year and massive currency intervention to support the Yen, nothing is working.

Time to join real world and start normalizing rates as inflation a true economic cancer, even imported variety like in Japan, as massive deflationary forces of falling land prices & terrible productivity continues nonstop due to depopulation & aging hence capital flight & zero FDI.

-1 ( +4 / -5 )

Keep in mind $ has lost well more than half its purchasing power in last 4 years regarding real assets. For example, CRB commodity index of comprised of energy, food, timber, industrial and rare metals etc.

Thus, Yen buys about 4x LESS of same CRB index above 4 years later, translation? "REAL" value of EVERY asset in Japan has collapsed, due to money printing, debt buildup, and decoupling = BRICS wanting ZERO Yen etc.

BRICS and most of global south rallied around Russia after globalists sought to expand NATO into Ukraine.

Above = WHY inflation so high in Japan but don't worry, Govt. says its only 2 or 3%, meanwhile everyone paying about twice as much for same groceries vs.4 years ago.

0 ( +5 / -5 )

Keep in mind folks, energy and food still being massively subsidized by Japan's Govt. for years now. If these subsidies (payments to corps) are removed, prices will take off like a SpaceX Starship here!

2 ( +6 / -4 )

"" That is a mistake in the article. Not a rate cut but rate hike .""

Yup, but everybody went home for dinner, LOL

1 ( +5 / -4 )

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