JPY Lost Ground As BOJ Adopts Negative Rates
Swissquote Bank Ltd | Jan 29, 2016 06:50AM ET
A few hours after the Japanese Ministry of Internal Affairs released depressing inflation figures, Governor Kuroda took the market by surprise as he announced that the BoJ will adopt negative interest rates, arguing it will stimulate investment and consumption. The market’s reaction did not take long. The Nikkei 225 jumped instantaneously by more than 4% to 17,638 points before collapsing to 16,767 points, to return finally above the 17,500 level. The sharp moves betray the market’s mixed feeling regarding the BoJ decision. Indeed, rumour are spreading that the central bank cut rates because either they realized that the marginal effect of an increase of the QE are very small - and they don’t want to expand their balance sheet further - or they couldn’t find any assets to buy. However, one thing is sure, inflation is still well below the BoJ’s target and showed no sign of picking up. On the FX side it was also rollercoaster session for JPY crosses. USD/JPY jumped from 118.50 to 121.41, then fell to 119.13 before bouncing back again to 120.70. In the end, the Japanese yen fell 1.50% against the greenback, 1.70% against the pound sterling, 1.10% against the euro and 1.15% against the Swiss franc. USD/JPY is currently testing the resistance implied by its 50dma (at 120.33). We expect the JPY to weaken further in the coming days as the negative interest rates will drive investors - the ones who were taking shelter amid the recent risk-off environment - out of yen positions.
Elsewhere, Asian regional markets were almost all trading higher amid the BoJ’s decision. In mainland China, the Shanghai and Shenzhen Composite were up 3.09% and 3.71% respectively, while in Hong Kong the Hang Seng was up 2.27%. In Singapore the STI rose 1.90%, while in Taiwan the TWSE was up 2.22%. European futures are also trading higher with the Footsie up 1.09%, DAX +1.16%, CAC 40 +1.17% and SMI +0.95%. US futures are also wearing green this morning: S&P 500 up 0.83%, NASDAQ Composite 0.71% and Dow Jones Industrial Average +1.03%.
Yesterday, another fresh batch of weak economic data were released by the US. Durable goods orders collapsed by an astonishing -5.1%y/y in December, while previous month figures were revised lower from 0.0% to -0.5%. As a result the US dollar moved lower with EUR/USD hitting 1.0968. The dollar index fell to 98.43. However, the greenback recovered overnight amid the BoJ’s decision to bring rates into negative territory.
Get The News You Want
Today traders will be watching Turkish trade balance; CPI and GDP from Spain; unemployment rate from Norway; CPI from the euro zone; trade balance from South Africa; GDP and industrial price index from Canada; GDP, core PCE, Chicago purchasing manager and personal consumption from the US and Michigan Index.
Currency Tech
EUR/USD
R 2: 1.1387
R 1: 1.1095
CURRENT: 1.0894
S 1: 1.0458
S 2: 1.0000
GBP/USD
R 2: 1.5242
R 1: 1.4969
CURRENT: 1.4371
S 1: 1.3657
S 2: 1.3503
USD/JPY
R 2: 125.86
R 1: 123.76
CURRENT: 120.75
S 1: 115.57
S 2: 105.23
USD/CHF
R 2: 1.0676
R 1: 1.0328
CURRENT: 1.0178
S 1: 0.9786
S 2: 0.9476
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.