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Foreign exchange trading reminder: aggressive interest rate hikes are expected to continue to push up the dollar, and the yen continues to brush a 20-year low

发布时间：2022-08-25 浏览：120

On Monday (April 18), the US dollar index rose 0.29% to 100.79, once touching 100.86, the highest since April 2020;

The yield of the benchmark US 10-year Treasury note hit a more than three-year high of 2.884%.

The US interest rate futures market predicts that the possibility of a 50 basis point interest rate hike at the Federal Reserve policy meeting in May is 96%, and the cumulative rate hike in 2022 is expected to be about 215 basis points, which provides sufficient support for the US dollar.

Juan Perez, director of foreign exchange trading at MONEX USA, said that there was indeed such a situation in history, that is, when the Federal Reserve planned to raise interest rates and tighten policies,

The dollar will eventually fall in these cycles, but at present, there is little optimism to drive down the dollar.

According to the data released by the Commodity Futures Trading Commission (CFTC) last Friday, the net long US dollar positions held by speculators fell for the second consecutive week.

As of the week of April 12, the size of net long US dollar positions fell to US $13.22 billion, compared with us $14.13 billion the previous week.

Scotiabank of Canada said in a research report that the foreign exchange market position did not "clearly indicate that the bullish sentiment of the US dollar has weakened", while the bets against the Swiss franc and the yen have further increased,

It reflects the yield advantage of the US dollar relative to these two currencies - the Bank of Sweden and the Bank of Japan are still far from beginning to tighten policy.

The euro fell 0.26% against the dollar to $1.0780, slightly off the lowest level since April 2020, when it hit $1.0758 last week,

Uncertainty about when interest rates in the eurozone will rise hit the euro.

After Bank of Japan governor Haruhiko Kuroda and finance minister Junichi Suzuki both expressed concerns about the weakness of the yen, the yen broke away from the 20-year low reached earlier,

This rally proved to be short-lived, and the yen hit a 20-year low in New York trading.

Marios hadjikyriacos, a senior investment analyst at XM, a foreign exchange broker, wrote in a research report that more and more people speculate that foreign exchange intervention will be carried out to save the yen,

Although this seems unlikely, Japan will have to intervene alone, because the United States and Europe will not agree to let their currencies fall in this inflationary environment, and the Japanese authorities have not even described these trends as "disorderly" and did not predict action.

Tuesday outlook

09:30 RBA announces minutes of monetary policy meeting

21:00 World Bank /imf releases world economic outlook report

22:30 World Bank /imf releases global financial stability report

00:05 a.m. Evans, chairman of the FOMC voting Committee and the Chicago Fed, delivered a speech at the New York Economic Club in 2023

Summary of institutional views

Chikako Mogi, foreign exchange analyst: the position of the Bank of Japan determines that the yen has downside space

For many years, the market has ignored the verbal warnings of Japanese government officials about the continued depreciation of the yen, indicating that the yen has room for further decline.

Japan is unlikely to actually intervene in the foreign exchange market by selling dollars and buying yen, unless there is a sudden sharp change in the yen exchange rate.

Given that the United States is trying to curb inflation and the Federal Reserve is preparing to withdraw liquidity, the United States does not need a weaker dollar at present. most important of all,

The Bank of Japan's pursuit of ultra loose monetary policy shows that it is almost illogical to intervene by buying domestic currency.

The relative differences between the Bank of Japan and other developed market central banks on the policy path will provide more reasons for the continued weakness of the yen.

Barclays' proposal to withdraw from long 10-year Treasury bonds as a result of losses

Barclays' U.S. interest rate strategist cancelled the proposal made on April 7 to increase the U.S. 10-year Treasury bond at 2.62% as a result of losses.

The yield of 10-year US Treasury bonds rose to nearly 2.88% on Monday, the highest level since December 2018. Anshul Pradhan, a strategist, said in a report that the uncertainty about how far the Fed is willing to go in its anti inflation path has increased, raising the expected level of long-term interest rates and embedded term premiums, making the bear market of the US Treasury bond yield curve steeper; These dynamics are likely to continue.