The Japanese yen experienced notable fluctuations as traders speculated about potential intervention by Japanese authorities to stabilize the currency. This uncertainty coincided with a more stable performance in global stocks, following a recent statement from US President Donald Trump regarding Greenland.
The Bank of Japan (BOJ) indicated its willingness to continue raising borrowing costs, which currently remain low. This announcement came in the context of heightened political activity in Japan, with a snap election scheduled for next month. During early trading in London, the yen unexpectedly reversed its losses against the US dollar, prompting speculation that Japanese officials may have conducted rate checks with banks. Such actions are typically seen as a precursor to market intervention, especially as the yen hovers at an 18-month low against the dollar.
In a related development, two-year Japanese government bond yields rose to 1.25 percent for the first time since August 1996. David Chao, a global market strategist for Asia-Pacific at Invesco, noted the BOJ’s increasingly hawkish tone. “The BOJ has raised four of its six inflation projections and indicated that further rate hikes are likely if these forecasts are realised,” he stated.
Global stocks managed to recover from earlier losses attributed to rising tensions between the United States and Europe. Following President Trump’s assurance that he would not impose trade tariffs regarding Greenland, global stocks increased by 0.1 percent, while European markets opened largely flat. Conversely, Wall Street futures indicated potential declines of 0.1 to 0.2 percent.
Market analysts expressed caution regarding the unpredictable nature of Trump’s policies. Marie de Leyssac, a portfolio manager at Edmond de Rothschild Asset Management, acknowledged the risks, stating, “Trump is really unpredictable, we know that. We still can have some threats one way or the other… It’s sure that the Europeans are still very cautious on this environment.”
Concerns about US assets are growing among major Northern European investors. Neil Birrell, chief investment officer at Premier Miton, remarked, “What it absolutely does is to heighten risk… It is making us think about cash levels and about our allocations to bonds and equities.”
The US dollar index, which gauges the dollar’s strength against a basket of six currencies, remained stable at 98.336, close to its lowest levels of the year following its largest one-day drop in six weeks. The dollar was down 0.2 percent against the yen at 158.02.
Futures for the Federal Reserve’s funds indicate a 95 percent probability that interest rates will remain unchanged at the upcoming two-day meeting on January 28, 2024, as reported by the CME Group’s FedWatch tool. The yield on the US 10-year Treasury bond stood at 4.2351 percent.
In the precious metals market, gold prices set new records, reaching an all-time high of USD 4,967.03 before slipping 0.6 percent to USD 4,908. In energy markets, Brent crude futures rose 1.1 percent to USD 64.74 per barrel, recovering as geopolitical risks surrounding Iran eased.
As market dynamics continue to unfold, both currency traders and investors remain vigilant amid ongoing geopolitical developments.
