The yen is bouncing back — here’s what’s happening in FX


Good morning!

The Japanese yen is stronger by 0.5% at 111.13 per dollar as of 8:00 a.m. ET. The currency’s rebound comes after it slumped to a three-week low on Friday, following a Bloomberg report that the BOJ may help banks lend by offering a negative rate on some loans.

Notably, the currency’s strength comes ahead of the Fed’s Wednesday meeting and the Bank of Japan’s Thursday meeting.

Regarding the BOJ meeting, some analysts are expecting the central bank to ease further.

“Headwinds to the Bank of Japan’s efforts to lift inflation have intensified in recent weeks. We expect the Bank to ease more in the upcoming meeting, most probably by increasing asset purchases and cutting interest rates,” argued Capital Economics’ Marcel Thieliant in a note to clients.

As for the rest of the world, here’s the scoreboard:

  • The dollar index is weaker by 0.3% at 94.85. Morgan Stanley’s Hans W. Redeker argued in a note to clients that, “the Fed is likely to keep its statement widely unchanged [on Wednesday] trying to maintain its flexibility to hike in the summer. It may even sound more positive on the economy given continued labour market strength … Accordingly, the USD should catch a bid this week not only against the JPY, but on a broader sense.”
  • The euro is stronger by 0.3% at 1.1254 despite the latest data showing that German business climate unexpectedly fell. Germany’s Ifo Business Climate survey slipped to 106.6 in April, down from March’s 106.7, and came in below expectations of 107.1. “Firms at both levels of trade were less satisfied with both their current situation and their business outlook,” Dr. Clemens Fuest from Ifo said in the report.
  • The British pound is stronger by 0.7% at 1.4482. Notably, Bloomberg reports that UK manufacturers, who have been struggling with a weaker pound, are going to try to increase prices to push the cost onto customers.
  • The Chinese yuan closed little changed at 6.4944 after the Financial Times reported that China’s debt total climbed to 237% of gross domestic product in thh first quarter, an all-time high.

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