- The Japanese yen fell below 144.65 against the US dollar, reaching a three-week low.
- This decline came after Bank of Japan Governor Kazuo Ueda stated that the bank has time to assess market and economic developments before adjusting monetary policy.
- His comments suggested that the Japanese central bank is in no rush to raise interest rates further.
- Ueda also warned of external risks, such as heightened volatility in financial markets and uncertainty over whether the US economy can achieve a soft landing.
Last week, the Bank of Japan kept its interest rate unchanged at 0.25%, in line with expectations. Recent developments have impacted the prospects of a rate hike in October, although it is still expected to be raised in December. Externally, the Yen faced renewed pressure from a stronger dollar as the Federal Reserve's interest rate cut boosted US economic expectations.
Bank of Japan has time to assess impact of two rate hikes
Unanimously, the Bank of Japan kept its key short-term interest rate at around 0.25% at its September meeting, remaining at its highest level since 2008, in line with market consensus. Friday’s decision confirmed that the BOJ is in no rush to raise rates again after raising them twice this year, in March and July. Also, the board noted the need for more time to monitor financial markets amid hawkish views from some members. The BOJ maintained its assessment that Japan’s economy remains on track for a moderate recovery, despite some areas of weakness. Private consumption continued its upward trend, helped by improved corporate profits and business spending. Exports and industrial production, however, remained relatively flat.
As for inflation, the annual figures ranged between 2.5% and 3.0%, driven by higher service prices. Meanwhile, inflation expectations showed a moderate increase, with the core consumer price index expected to rise gradually.
On the stock trading platforms front, Japanese stocks rose after Ueda’s statements. According to trading, the Nikkei 225 index rose 0.57% to close at 37,941 points, while the broader TOPIX index rose 0.54% to close at 2,657 points in post-holiday trading on Tuesday, as Japanese stocks recorded their highest level in three weeks and followed an upward march on Wall Street supported by the large interest rate cut by the US Federal Reserve.
On the front of stock trading platforms, Japanese stocks rose after Ueda's comments. According to trades, the Nikkei 225 index rose 0.57% to close at 37,941 points. Meanwhile, the broader TOPIX index rose 0.54% to close at 2657 points in post-holiday trading on Tuesday, with Japanese stocks hitting a three-week high and following an upward trajectory on Wall Street supported by a large interest rate cut by the Federal Reserve.
Domestically, Bank of Japan Governor Kazuo Ueda said they have time to assess market and economic developments before adjusting monetary policy, indicating that the Bank of Japan is not in a hurry to raise interest rates further. Meanwhile, the latest data showed that Japan's manufacturing activity contracted further in September, while the services sector accelerated. Notable performances were seen in the shares of heavyweight companies in the index, such as Mitsubishi Heavy Industries shares (4.3%), Hitachi shares (5%), SoftBank Group shares (1.3%), Sony Group shares (2.9%), and Kawasaki Heavy Industries shares (2.9%).
On the US stock markets, the S&P 500 and Dow Jones hovered near record levels. According to trades, US stocks rose slightly on Tuesday, after both the S&P 500 and Dow Jones closed at record highs in the previous session, with the rally continuing to be driven by the Federal Reserve. According to performance, the S&P 500 added 0.1%, the Dow Jones gained 50 points, and the Nasdaq added 0.3%.
Meanwhile, the People's Bank of China's measures to stimulate its economy boosted market sentiment, while investors await the US Personal Consumption Expenditure report later in the week. Materials and energy were among the best-performing sectors, while financial stocks fell more than others. Large-cap stocks were mixed, with Apple shares up 0.7%, Nvidia up 0.5%, and Alphabet up 0.2%, while Microsoft (-0.4%), Amazon (-0.3%), and Meta (-0.4%) were in the red.
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USD/JPY Technical Analysis and Expectations Today:
Based on the gains of the recent trading sessions and the performance on the daily chart, the USD/JPY pair is starting to form an upward channel. Technically, the bullish outlook will strengthen on this timeframe if the bulls push the pair towards the resistance levels of 146.90 and 148.00. therefore, the last level will motivate the bulls to move towards the psychological resistance level of 150.00. On the other hand, and on the same timeframe, a return below the support level of 141.80 threatens the current upward trend.
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