FX CURRENCY WATCH
months. They also continued to envisage another three hikes next year.
Fig. A – Strong correlation between the USD/JPY and yield differentials vs. the USA Fig. B – Yen supported by renewed geopolitical tensions
far as USD/JPY 112) in September, on the recovery in American yields, supported by strong US data which rekindled expectations for another Fed hike this year, as subsequently effectively confirmed at the latest FOMC meeting. At the meeting on 20 September (at which the Fed
22 FX TRADER MAGAZINE October - December 2017
announced its intention to start the process of reducing its balance sheet in October), a solid majority of FOMC participants confirmed their expectations to proceed with a third rate hike by the end of year (probably in December) – a move the markets had started to doubt in previous
Simultaneously, at its latest meeting on 21 September, the BoJ kept unchanged all its policy, confirming the need to continue indefinitely with the joint QQE and yields curve control strategy, as although the growth picture for the Japanese economy has kept improving, inflation, on the other hand, remains persistently low (0.4% in July) and too distant from the 2% target. In its half-yearly outlook published in July, the BoJ revised down its inflation forecasts from 1.4% to 1.1% this year, from 1.7% to 1.5% next year, and from 1.9% to 1.8% (therefore still below target) in Tis implies that – for a rather lengthy period of time, i.e. at least for all of next year – the BoJ will continue to pursue a divergent policy compared not only to the Fed, but also to all the other central banks in the advanced economies (with the exception of the SNB), as it will be the only one not yet in the position to begin normalising monetary policy, neither in terms of rates (still at zero or negative: the short-term rate is at -0.10% and the 10Y rate at a 0%), nor in terms of QE. In fact, at the conclusion of the latest meeting, BoJ Governor Kuroda reasserted that the central bank would be prepared to further slacken monetary policy if necessary, in order to pursue the inflation goal. In a subsequent address, Kuroda added that the central bank
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70
